10 ms·

Facebook acquires Instagram

• jc4p 14y ago
  It's a little too late for April Fool's isn't it? It seems strange that they're deciding to keep the Instagram social network up as its own independent social network, that leads me to think that their acquisition was really for their big data talent and not just to squash a smaller social network. I wish Mike Krieger's tech talk was more than two days away now, so we could hear about how they're going to merge with Facebook's big data issues too.
  • iamhenry 14y ago
    I can't believe this either...
• deleted 14y ago
  [deleted]
• briancray 14y ago
  Can anyone hear the flush sound?
  • gavanwoolery 14y ago
    Upvotes for you, sir!
• brlewis 14y ago
  I think it's cool and bold that he's sharing specific features of Instagram that they plan to preserve. It's bold because it increases the PR cost of changing those plans.
  • op_amp 14y ago
    "we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people"
    • gcl2 14y ago
      Haven't you heard, that's the cool thing for startup founders to say while trying their best to get acquired behind closed doors. It used to be a better world when they just tried their best to get acquired without making public claims to the contrary.
      • cpach 14y ago
        But that's the words of Zuckerberg, not the Instagram founders.
• tomasienrbc 14y ago
  Posted a blog that (partly) talks about how Instagram poses a massive threat to Facebook TWO MINUTES before this broke. Needless to say, everyone's going to be reading Zuck and ignoring http://blog.thecityswig.com http://blog.thecityswig.com but it's a cool coincidence
• jtchang 14y ago
  Congrats to Instagram! Can't say I am not bit disappointed though with all the startups getting gobbled up by much larger companies. What's next? Pinterest?
  • freehunter 14y ago
    Not saying I'd like to see it happen, but Pintrest would fit in well with Google+, moreso than Facebook. Google+ really does the sharing+comments thing well. It's hard to know where to root. Independent start-ups give great competition to the big players, but I know a lot of people go into an MVP with the goal of making a large exit. It's a great way to get funding for your next startup.
  • smiler 14y ago
    Why are you surprised? Most startups are built to either go IPO or exit through a buy out. Considering many startups (including Instagram) do not even come up with a profitable business model, it excludes IPO and therefore only leaves an exit as a way for investors to recoup their investment.
  • skeletonjelly 14y ago
    Wasn't Pinterest announced the third biggest social network last week? I'm sure it will be a matter of time.
• jsm386 14y ago
  According to WSJ price is $1B source: http://allthingsd.com/20120409/breaking-facebook-to-acquire-instagram-for-1-billion/* http://allthingsd.com/20120409/breaking-facebook-to-acquire-... Edit: Direct Source: http://newsroom.fb.com/Announcements/Facebook-to-Acquire-Instagram-141.aspx http://newsroom.fb.com/Announcements/Facebook-to-Acquire-Ins... The total consideration for San Francisco-based Instagram is approximately $1 billion in a combination of cash and shares of Facebook. The transaction, which is subject to customary closing conditions, is expected to close later this quarter.
  • Toddward 14y ago
    Quite a jump from the $500 million valuation they were shooting for last week[1]. [1]http://techcrunch.com/2012/03/08/no-filter-required-instagram-reportedly-raising-40m-at-500m-valuation/ http://techcrunch.com/2012/03/08/no-filter-required-instagra...
    • jonursenbach 14y ago
      Wonder if there was a bidding war between FB and Google that caused it to double off of that.
      • redthrowaway 14y ago
        I think something like that had to have happened for the valuation to get so high. Apple may have been in the hunt as well, given their propensity for acquiring popular iOS apps and rolling the functionality into vanilla iOS.
        • marcamillion 14y ago
          The valuation wasn't all that high. It was just twice that of the last round. In order for the investors that just came in to get any sufficient return on their investment, they had to at least double their money. Ignore, for a second, that it was just 1 month (or 1 night as Techcrunch suggests) - it doesn't matter. The purchase price is usually determined based on the latest round of financing.
• johnrob 14y ago
  I had been wondering how a product like Instagram would ever make money. Now we'll never find out. I guess traction really does trump all other business metrics.
  • mariorz 14y ago
    path seems to be experimenting with in-app purchases for additional photo filters.
  • itg 14y ago
    It's beginning to remind me of the late 90's where the only thing that mattered was number of "eyeballs" on your site, sound business plans/profits be damned.
    • rbranson 14y ago
      The difference being that the burn rate of these companies is minuscule compared to what was going on the late 90s. They built a 30 million user social network with 5 engineers. This changes the dynamic tremendously.
• deleted 14y ago
  [deleted]
• jakelear 14y ago
  This is a smart move by Facebook. I'm almost surprised to see them acknowledge in the initial announcement that they'll retain the ability for Instagram to interact with other social networks, although I'll be interested to see how thoroughly those features are supported as Facebook takes the reigns.
• teoruiz 14y ago
  It doesn't say but any wild guess on how much did Facebook pay?
  • goronbjorn 14y ago
    $1b according to WSJ
• dreamdu5t 14y ago
  Why did Facebook buy Instagram if they aren't going to require FB integration and allow you to post to other networks? Is it purely about traffic now?
• statictype 14y ago
  How many photo-related startups has Facebook acquired now? And what do they gain from Instagram? A user base? Most of them are probably already on Facebook? Technology for handling photos? Doesn't Facebook already do this as well as anyone else? Design and UI talent for mobile apps? Don't they already have Mike Matas?
  • jc4p 14y ago
    Most of Instagram's "technology for handing photos" uses S3, as described in previous Instagram tech blog posts. Instagram however has a massive big data structure which would lead to any big company getting high value out of them. Why use the tools they open sourced last week to improve your reliability if you can just acquire the entire team?
    • statictype 14y ago
      I'm not entirely convinced that Facebook can benefit from Instagram's infrastructure more than the Instagram can benefit from Facebook's.
    • untog 14y ago
      I'm pretty sure that Facebook has "handling a lot of photos" sorted: http://gizmodo.com/5841667/facebook-photo-library-dwarfs-everything-else-in-the-planet http://gizmodo.com/5841667/facebook-photo-library-dwarfs-eve...
      • enfoster 14y ago
        the thing is that they don't have it sorted. Trying to do any sort of photo management(move, delete, edit) in Facebook is a pain and I always receive database errors thrown back at me.
  • davidcuddeback 14y ago
    They can kill off a photo service that rivals their own. (I can't judge which one's better, because I use neither.) Edit: I know Zuck says they will continue to build Instragram. I'm skeptical.
• cmer 14y ago
  According to Crunchbase and Techcrunch, they raised $40M just a month ago at a $500M valuation. Something doesn't add up here. A billion dollar deal like this had to take more than a couple of weeks to close... http://techcrunch.com/2012/03/08/no-filter-required-instagram-reportedly-raising-40m-at-500m-valuation/ http://techcrunch.com/2012/03/08/no-filter-required-instagra...
  • draggnar 14y ago
    Is it against some regulation to do negotiations concurrently?
    • dkasper 14y ago
      No. Some deals will include "no-shop" and other similar clauses to prevent this sort of thing, but it's definitely not a requirement.
    • cmer 14y ago
      No but why raise so much money at such a lousy valuation if you're 30 days away from a billion dollar exit?
  • cperciva 14y ago
    "poised to pick up another round of funding" doesn't mean that the funding round has actually closed. Sounds to me like they were keeping their options open, using the threat of raising another VC round to get Facebook to hurry up with an offer.
    • guan 14y ago
      According to TechCrunch, the round did close and the money was wired to Instagram last Thursday. http://techcrunch.com/2012/04/09/right-before-acquisition-instagram-closed-50m-at-a-500m-valuation-from-sequoia-thrive-greylock-and-benchmark/ http://techcrunch.com/2012/04/09/right-before-acquisition-in...
  • brackin 14y ago
    It was announced then, could have been raised in 2011 or earlier this year.
• kylec 14y ago
  Some of you might find this useful: https://instagram.com/accounts/remove/request/ https://instagram.com/accounts/remove/request/
  • amirhhz 14y ago
    When I read the headline I thought two things: a) Wow, the Instagram guys deserve it, congrats to them. b) I need to delete my account. The second point is because I have been actively trying to avoid giving fb more data than absolutely necessary. No ill will towards Instagram.
    • yawn 14y ago
      Same reaction here. Pretty sad to delete it, actually. The other day I was using Instagram as an example of a social app with a friend list that WASN'T Facebook. sigh Edit: spelling.
      • gdubs 14y ago
        Funny, I had a similar reaction. I was really late to the Instagram party but the biggest thing I liked about it was that it was an alternative way to keep a circle of friends. For whatever reason, I quickly re-connected with some quality people that I had lost track of over the years, but was happy to find on Instagram. Fittingly, a bunch of us had actually taken photo classes together over a decade ago.
    • cheap 14y ago
      This was EXACTLY my feelings. I sat down after lunch, read the headline, opened up my browser, changed my user profile information and deactivated my account. Good luck Instagram, but I can't stand Zuckerborg.
    • emehrkay 14y ago
      Yes. I JUST deleted (deactivated/request removal) my FaceBook account over the weekend.
• goronbjorn 14y ago
  Instagram is such a great experience for a number of reasons, but one of them is the separate network it provides from Facebook. Maybe I'm in the minority, but my Facebook network is substantially different from my Instagram network. /: I hope Facebook is careful with this one…
• rcchen 14y ago
  Anyone else think that the proximity of the announcement of Instagram for Android last week to today's acquisition was not a coincidence?
• jordhy 14y ago
  I'm not very clear on the main driving factor of this acquisition: is it a talent grab, a technology acquisition or did they acquire Instagram mainly for the customer base. FB really wanted Instagram. They've been in talks since August 2011: http://thenextweb.com/insider/2011/08/24/facebook-couldnt-acquire-instagram-so-its-making-its-own-filters/ http://thenextweb.com/insider/2011/08/24/facebook-couldnt-ac...
  • untog 14y ago
    Zuck's post gives a few clues. "We will try to learn from Instagram's experience to build similar features into our other products. At the same time, we will try to help Instagram continue to grow by using Facebook's strong engineering team and infrastructure."
    • sp332 14y ago
      Oh, so not tech talent, but talent in developing a loyal and active userbase. That could be worth $1B to FB.
  • tptacek 14y ago
    I feel like I can safely declare that there is no such thing as a one billion dollar talent acquisition.
    • davidw 14y ago
      Maybe in Zimbabwe, but otherwise, it doesn't seem likely, does it.
      • taejo 14y ago
        Zimbabwe dropped the Zimbabwe dollar in 2009. They now use US dollars.
    • j_baker 14y ago
      Well, it certainly wouldn't happen if your company employs anyone other than Turing, Einstein, Dijkstra, and Knuth. That said, that doesn't mean that the talent isn't inflating the price at least a little bit.
• j_baker 14y ago
  I have to say: it's nice to see an acquisition where the product is valued enough to not be summarily taken out back and shot. I'm curious how it fits into Facebook's product strategy though. It doesn't seem to be their style to keep a brand around that doesn't help their main brand somehow.
  • deleted 14y ago
    [deleted]
  • fredsters_s 14y ago
    wait - you think this is actually true?
    • skrish 14y ago
      Is your question about the acquisition itself or that service will be continued?
      • fredsters_s 14y ago
        "the product is valued enough to not be summarily taken out back and shot"
    • deleted 14y ago
      [deleted]
  • skrish 14y ago
    +1. It really is nice and the news coming from acquirer than the acquired makes it sound better. That just makes it that much more difficult for them to say "it is no longer a service that interacts with other social networks" without a public backlash among user community. Good to see the commitment coming from Zuckerberg.
  • brlewis 14y ago
    FriendFeed wasn't taken out back and shot either -- it's still running, albeit with some broken features. It doesn't hurt Facebook to leave a service running. With Instagram, I think it's a case of user acquisition trumping product strategy. If lots of people are joining Instagram, Facebook wants to own it regardless of how it fits with their main brand.
• skrish 14y ago
  Congratulations to the Instagram team. With all the news of talent acquisition and subsequent shutdown news, my first reaction was "oh god! yet another shutdown!". Thankfully there are some very good statements in the announcement. "...we're committed to building and growing Instagram independently. " Hope this is true especially for the sake of all the startups that are betting on Instagram and building associated products on top.
• zinssmeister 14y ago
  Instagram has an awesome team and kept stealing eye-balls from facebook. It makes a lot of sense for facebook to get this team AND the product.
• methoddk 14y ago
  As long as they keep instagram intact as the service it is now, then awesome. If Facebook kills my favorite platform, that would make for a really sad day.
• callmeed 14y ago
  You know, I used to be pretty lax (careless, even) about geotagging all my Instagram photos. Now, should I continue to use Instagram at all, I'm definitely not going to share my location.
  • envex 14y ago
    Just curious, but why the change of heart?
    • theorique 14y ago
      Facebook will add all the locations to their giant, evil database.
      • jsz0 14y ago
        Instagram would have too when they needed to make some money.
    • callmeed 14y ago
      The last thing I want is people on FB seeing "Erik's Backyard Patio" when they are nearby. Or, even worse, giving my backyard patio a bad review ;)
• mrgreenfur 14y ago
  Does anyone else think this valuation is insane? It's like $300/registered user. The company doesn't have a business model. No way the handful of employees are worth $1B. My mind is blown.
  • amcnellis 14y ago
    Really boggles the mind. Would love to see the company's financials.
  • ptomato 14y ago
    More like $30/user, I should note. They have 30 million on iOS and some number > 1 million on android.
• deleted 14y ago
  [deleted]
  • dkasper 14y ago
    For $1 billion? Definitely not only a talent acquisition.
    • ryangilbert 14y ago
      Exactly. They have over 27 million users. Surely that played a role in the acquisition as well.
  • tptacek 14y ago
    A one billion dollar talent acquisition.
  • YuriNiyazov 14y ago
    They have a userbase which is 100% mobile, something that facebook doesn't have. A talent acquisition for $1B? This can's be a serious question.
    • minalecs 14y ago
      google was willing to buy path for 100 million very early, which would of been primarily a talent acquisition. With Instagram's community, install base, along with a bidding war .. I don't see it as just a talent acquisition, but primarily the motivating factor. Plus it was for money and stock without really knowing what the percentages are.. facebook stock is valued pretty high these days. http://techcrunch.com/2011/02/02/google-tried-to-buy-path-for-100-million-path-said-no/ http://techcrunch.com/2011/02/02/google-tried-to-buy-path-fo...
• wavephorm 14y ago
  That's an awful lot of money for a business that had no revenue and had no business model of any kind. http://windonaleaf.net/post/20464525754/instagram-perform-ads http://windonaleaf.net/post/20464525754/instagram-perform-ad...
  • 2pasc 14y ago
    I agree...but the point was not about the revenues, the point was about making sure that when you think about photos - to share or to browse(which is the most used app on Facebook), you think about Facebook. The risk of being displaced by Instagram on that crucial activity was too high for Facebook.
    • orblivion 14y ago
      So Facebook is like giant a rail company in the late 1800s.
      • 2pasc 14y ago
        Well... 1B is an amazing amount of money, but it is "just" 1% of Facebook post IPO value. What are the odds that Instagram growing more and more, the market freaks out, and Facebook stock loses 3-4% in a few weeks. Facebook buying Instagram is an insurance against this bumpy ride happening, and at a price much less that what it would be on the stock once Facebook becomes public.
      • dkrich 14y ago
        Except that in the 1800's you couldn't build another B&O in six months with a couple of nerds with Macs.
      • skeletonjelly 14y ago
        You're thinking of Valve.
  • mhartl 14y ago
    It's a strategic acquisition. Such acquisitions are common, especially in the Valley. This is one reason why startups should primarily work to "make something people want" (the official Y Combinator motto) rather than focusing on making money. True, sometimes a startup achieves spectacular growth without ever finding a way to turn it into money, but examples are surprisingly rare. Can you think of any offhand? Maybe Twitter, but I'd bet they'll find a way to be hugely profitable someday.
• untog 14y ago
  Anyone got some bad news about their startup that they need to release? Get that press release out, stat.
• mikecane 14y ago
  Now before you all wonder about that valuation and technology, consider that Zuckerberg is actually buying the users and their data. Anyone recall this back in the day? Yahoo! buying BCST.com http://money.cnn.com/1999/04/01/deals/yahoo/ http://money.cnn.com/1999/04/01/deals/yahoo/
• joshbaptiste 14y ago
  Congrats to Instagram, Django-powered projects making it big.
  • ojr 14y ago
    PHP projects buying them
• inmygarage 14y ago
  This is very reminiscent of Google/YouTube circa 2006. When Google bought YT it was a small team of people and a pretty nascent product that people really loved, and the usage numbers were out of control. They left the product mostly untouched and let it grow on its own. Though there was major criticism at the time, it is one of the best tech acquisitions of the past decade.
  • redthrowaway 14y ago
    It was also only really possible given the resources Google had to throw at YT. It was years before YT was profitable, and even then it was only with the introduction of intrusive ads that that was possible. A company without Google's deep pockets would likely have had a hard time giving YT the chance to grow organically, without trying to butt in and make it profitable.
    • homosaur 14y ago
      Maybe YouTube could have done it on their own too, but a big reason why Google was able to keep YT afloat was its widespread peering agreements. So even though it bled cash for years, it didn't bleed near as much cash as it could have because they paid very little for their actual bandwidth.
  • homosaur 14y ago
    YouTube is a content paradise though. There's tons of value there and you can sell ads against it or even charge for premium services. Where's the money in Instagram? The content is practically worthless and their only real value is in their userbase. Even though I use the Instagram client, most of the time I see photos, they come through Twitter. So that also reinforces for me that any value is in the users and not the actual content, which is mostly crap. I'm more convinced that we're in a 2nd bubble now more than ever.
    • freehunter 14y ago
      Facebook currently has very limited editing for their pictures. By acquiring a well-known and talented company, Facebook can roll this into their current offerings. I would be very skeptical that this was a user-driven move. I can't imagine a large percentage of Instagram users who are not also Facebook users, even if people posted a lot of Instagrams to Twitter.
• dave1619 14y ago
  Congrats to the Instagram team. An amazing group of people that really worked lean and delivered what people really needed.
• dongsheng 14y ago
  Facebook acting really fast nowadays, especially when comes to require good developers.
• senthilnayagam 14y ago
  Facebook should buy extragr.am as well the best web UI for instagram
  • senthilnayagam 14y ago
    Ok downvoters, not asking for a billion dollar valuation, just saying it was a good match with instagram
• deleted 14y ago
  [deleted]
• veyron 14y ago
  The price tag certainly is consistent with a 100B price tag on Facebook. I'm going to assume this merely keeps the bubble going until the IPO. In finance land there are rumors of difficulty finding people to buy into the IPO and this should theoretically instill confidence
• gbog 14y ago
  I just downloaded Instagram for Android the other day and wondered how to save pictures on my phone with this tool... apparently you can't, so yes, Facebook and them play in the same court: you don't own your things anymore.
  • bbenvegnu 14y ago
    you can save. at least on iOS, tou can.
  • there 14y ago
    Every picture you take with Instagram is saved on the phone. Take a picture, optionally apply a filter, hit next, but don't hit Upload. Go to the Gallery app and you'll see an Instagram folder with your filtered photo, and a copy of the original photo in the Camera folder.
    • gbog 14y ago
      You are right, I was wrong: didn't see this folder.
  • blhack 14y ago
    This definitely isn't the case on iOS. I use instagram all the time, but only for the filters. Pictures I take with it get put on dropbox.
• juliano_q 14y ago
  After only one week using Instagram for Android it was already my favorite network. Congrats for the Instagram team, but I cant deny that I just lost much of my sympathy for the network, since I can´t stand the way that Facebook handles privacy anymore.
• tzz 14y ago
  One good thing about being bought by bigger player is that it creates a void for other smaller innovative startups. Instagram is easier to compete against now than when it was independent.
• ary 14y ago
  Unfortunately you still have to write in to cancel your Instagram account.
  • ben1040 14y ago
    I just canceled mine five minutes ago with this form: https://instagram.com/accounts/remove/request/ https://instagram.com/accounts/remove/request/
    • ary 14y ago
      Out of curiosity where did you find that link? I must have missed it when I checked the site.
      • ben1040 14y ago
        The first few hits on a google search for "instagram cancel" indicated you had to write in, but then I found this. http://help.instagram.com/customer/portal/articles/95760 http://help.instagram.com/customer/portal/articles/95760
    • JosephHatfield 14y ago
      So did I. Thanks for posting that link. It's a sad day for me.
• wensing 14y ago
  The main reason they were acquired? Not the tech, not the audience (does FB need either?). I guess for the brand + engagement? Someone said as a defense against the big G acquiring them later - sounds plausible?
• nilsbunger 14y ago
  Zuck's announcement seems really thoughtful and authentic. He hit on a bunch of things people would be worried about -- whether things would automatically post, whether you can maintain a separate follower list from your FB list. He showed respect and humility towards Instagram's follower model, and interest in bringing it into other products. I'm impressed.
• tptacek 14y ago
  This seems ominous for Google, which spent $12.5bn for Motorola to stake a shaky claim in mobile and lord knows how much on G+; after this, what's left for them to do to stake a claim on social mobile? Buy Twitter? What else do people do socially with their phones? Totally possible for Google to sink tens of billions into mobile and still wind up on the bottom of the value chain, commoditized along one axis by Facebook and utterly outmarketed by Apple (with its extraordinary profit margins and increasing domination of supply chains) on another. Or maybe GOOG/Twitter is in the air, and Facebook is reacting defensively?
  • huggyface 14y ago
    Utterly outmarketed by Apple? What a curious take that is, though it is a natural statement when you're so desperate to try to drag Google into this. Instagram is a tool that has a limited shelf-life, with a userbase that is almost certainly already on Facebook. Declaring this some sort of coup for Facebook seems weird, given that the overwhelming sentiment is that Facebook has more net worth than brains at this point.
    • tptacek 14y ago
      Apple takes 75 cents out of every dollar of profit in mobile. The second graf isn't worth responding to. I'm not as emotional about tech companies as you seem to be.
      • huggyface 14y ago
        I was replying directly to the undercurrent of your message which is rather hard to miss. "This seems ominous for Google...a shaky claim in mobile....what's left for them...sink tens of billions into mobile and still wind up on the bottom of the value chain...utterly outmarketed" That's the TLDR version of you pulling Google into a relatively small acquisition of a largely irrelevant tool that a subset of one relatively small platform is even engaged in. Most people reading this story quite rightly react "Instawho?", whereas you see it as a clanging bell of doom for Google. And I'm the emotional one?
• yarapavan 14y ago
  $1 billion for a 13-person team? Is this the highest per-employee price tag?
  • Raphael 14y ago
    Has to be.
  • rokhayakebe 14y ago
    I thought that was the real story here.
• loceng 14y ago
  It's for the users, to prevent a competitor from 'owning' them - Facebook could block the API, otherwise all of their competitors can still gain access to them. If Facebook does start to screw around with the API then they're destroying value to the consumer. It's really too bad Instagram sold so soon. I hope they took mostly money.
  • brlewis 14y ago
    The API already only gives access to 612x612 images with limited metadata. All Facebook has to do is keep them from improving the API.
• RexRollman 14y ago
  I wonder if Facebook will force their sense of decorum onto Instagram. For example, there are people using Instagram to create interesting nude photography, which is something that is not allowed on Facebook (unless I am mistaken). In any case, I bet you can expect them to force everyone to use Facebook for logging in. Yahoo eventually forced us Flickr users to get Yahoo accounts in order to log in.
  • freehunter 14y ago
    According to their press release, Instagram will continue to work independently and use alternative networks. Until they prove otherwise with their actions, all anyone can do is speculate.
• andrewhillman 14y ago
  I think this shows that FB felt threatened by Instagram because photos are in fact the thin edge of the wedge of social networks. People spend a lot of time on sites viewing photos and FB doesn't like when people are spending time on other networks.
• marcamillion 14y ago
  Some quick back-of-the-envelope math for how much the co-founders walked away with. Assuming the first round of $500K was @ $2.5M valuation, giving those investors 20%. So the founders are left with 80%. Further assume the 2nd round of $7M @ $20M valuation, giving those investors 35%. So the founders are left with 45%. Further assume the 3rd round of $40M @ $500M valuation, giving those investors 8%. So the founders are left with 37%. Also assume that the employee stock options pool is worth 10% of equity. Founders left with 27%. There are two founders, according to Crunchbase [1], so assuming a 50% split for each founder, each founder has 13.5%. At $1B, each founder walks away with a cool $135M in cash + Facebook stock (which is likely to appreciate significantly in a few months) - which is likely another reason they chose to go with FB as opposed to Google. Not bad for 2 years worth of work. [1] - http://www.crunchbase.com/company/instagram http://www.crunchbase.com/company/instagram
  • Finbarr 14y ago
    I'm not sure that your numbers account for share dilution. Let's assume the employee stock pool is 10% before any funding is raised so the founders start with 90% and the employees 10%. Assuming your numbers above are correct, the founders are left with 72% after the first round of investment (500k at 2.5m = 20%) and the employees are left with 8% (think 72 + 8 + 20 = 100). The second round of investment takes 35% of the company, leaving the founders with 46.8%, employees with 5.2%, first investors with 13% and the new investors with 35% (46.8 + 5.2 + 13 + 35 = 100). The third round of investment takes 8% of the company leaving the founders with 43.056%, the employees with 4.784%, the first investors with 11.96%, the second investors with 32.2 and the new investors with 8% (43.056 + 4.784 + 11.96 + 32.2 = 100). If my math is correct, the founders may have ended up with more like $430,560,000 between them ($215,280,000 each assuming 50/50).
    • marcamillion 14y ago
      You may be correct. I was just doing some rough calculations to show an approximate 'low-figure' of their take. It is very possible and likely that they took away much more (because all of the variables could have changed). For instance, that first $500K round could have been convertible debt which would have converted in the $20M round. If that's the case, then those investors ended up with 2.5% instead of 20%. That drastically changes the math and gives the founders more equity and a better outcome.
• yawn 14y ago
  2 things I'm very curious about: 1. What role did the Android app play? 2. When did these two start communicating?
• rumblestrut 14y ago
  Dear Facebook: My student loans are for sale at cost. Please contact me for details.
• A-K 14y ago
  It's nice to see that Zuckerberg's letter actually addresses some key concerns about Instagram's future--a courtesy I haven't seen offered by many recent "acqhirers". However, to echo several other comments, it'll be interesting to see to what degree the stated intentions are actually upheld.
• huoju 14y ago
  "Sell to Goole" era is ending. "Sell to Facebook" era is beginning.
  • XiQiao 14y ago
    google~~
• johnrob 14y ago
  This price makes plenty of sense if you think of as "instagram was bought for x% of facebook". I don't know facebook's current valuation, but I could be convinced that instagram is worth something between 2-10% of it (500M users vs 30M users, all sharing pictures daily). The reason for the billion dollar number has nothing to do with instagram, and everything to do with facebook.
• kposehn 14y ago
  So, I found something very interesting in Mark Zuckerberg's post about acquiring Instagram: > we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people. Facebook has always integrated whatever it purchased (that I know of) very tightly into the core product, or just done an acqui-hire. Instead, they've taken what is arguably the best way to share photos and decided to keep it as a product that exists on its own. This is a major strategy change for Facebook and speaks to something I have suspected for some time - they now understand that in order to continue spurring growth, they cannot just acquire and roll in every product. As the ecosystem starts to hit a long-term maturity cycle, other products that fulfill particular functions better will be key to maintaining dominance over the market as a whole. Let's face it: G+ cannot topple Facebook (though it probably wasn't intended to anyway), Twitter is fairly specialized and Pinterest has come up with a new way to share that fits neatly with the other two. Instagram makes immense logic as a purchase for Facebook as they'll control one of the most important ways people share photos outside their product, neatly roping everyone that uses it right into the FB circle without feeling forced to do so.
  • untog 14y ago
    They sort of did it with Beluga- it became "Facebook Messenger" but was never integrated into the main app. At the time I was confused as to why they'd do that, but if you think of it as a replacement for the stock "Messages" app, and Instagram for "Camera" then it all starts to come together.
    • kposehn 14y ago
      Good point - though they did eliminate the brand with Beluga, and they probably won't with Instagram. That could change though. Besides messaging and photos, I'm thinking that few things are left as halo products around Facebook. There's no reason for a "games" app - to me, at least - but there might be logic in acquiring something like Turntable.fm for music.
      • 14y ago
• Baba_Chaghaloo 14y ago
  Call me paranoid but for them to spend $1 billion on this silly thing tells me they think there are big profits to be made with facial recognition data.
• awongh 14y ago
  Will this mean that they'll finally get a real website? I'd love to be able to browse my friends' photos. It seemed to me that the complete lack of functionality on the single photo page (not even a link to your home page?!) seemed like a big middle finger to non-mobile users. Anytime I clicked through from facebook and twitter, the fact that I couldn't get anywhere from there was enough of a turn-off to make me avoid getting the iOS app. Or maybe it'll be folded into the horrible UI mess that is FB and go away....
• thisismyname 14y ago
  Interesting that everyone is focused on Instagram as a company and how they just got $1 billion. I find it interesting that Mark and Facebook were able to buy a company for $1 billion. Its like the joke chris rock said about being wealthy. "Shaq is rich, the white man that signs his check is wealthy"
• bimil 14y ago
  Congrats to Instagram. I think the real value that's been overlooked for Instagram is the Instagram community. Instagram has a very strong community around the world (www.instagramers.com has more than 250 chapter groups) and that may be one of the factors Facebook was looking at.
• drpancake 14y ago
  27 million iOS users + 50 million projected Android users means that this cost them roughly $13/user.
• joeblau 14y ago
  Can someone explain how this isn't insider trading? Day before deal: - Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation. Day of deal: - Company gets purchased for 1 billion. - All investors instantly double investment.
  • damoncali 14y ago
    Instagram is not public.
  • ochiba 14y ago
    Christine Herron's comment on this post seems to explain: http://techcrunch.com/2012/04/09/right-before-acquisition-instagram-closed-50m-at-a-500m-valuation-from-sequoia-thrive-greylock-and-benchmark/ http://techcrunch.com/2012/04/09/right-before-acquisition-in... "It's common to use an impending investment valuation to drive a higher acquisition valuation. Strategic/acquisition values are typically much higher than investment values. eg, as of today, Instagram is worth more to Facebook than it is to Sequoia, because Facebook gets strategic value in addition to market value. Also note that an investor with a signed term sheet would be fully aware that acquisition discussions were taking place, as well as what valuation range they were in. I would be surprised if Sequoia did not go into this with eyes wide open. They win either way - an instant 2X multiple on investment (and a crazy high IRR), or a highly desirable company that they believe has growth potential. Call me jealous."
  • mdda 14y ago
    It's not insider trading, since the stock is not traded on a public market : There's no presumption that all the facts are out in the open. As long as there's no misrepresentation, it's all 'just business'. How about : "Let me invest right now, so that I won't vote against the FB offer you've got on the table". Or "If you let me invest now, I can make a recommendation to the FB board that they acquire you".
    • joeblau 14y ago
      Thank you :)
• nQuo 14y ago
  While a bit harsh considering Instagram's success, I completely agree with this quote from Steve Jobs on startups: http://instagr.am/p/JNVJIwBElP/ http://instagr.am/p/JNVJIwBElP/
  • regularjack 14y ago
    So Steve Jobs hated entrepeneurs who who were just looking for someone to buy they startup. Following that line of reasoning, he most have loved it when Dropbox refused to sell to Apple.
• mkr-hn 14y ago
  What's really interesting to me is that they have a flood of geolocated pictures of places now. And they have a partnership with Microsoft. Photosynth integration on Instagram with all your photos would be amazing.
• babuskov 14y ago
  Looks like Gary Vaynerchuk's was right: http://www.youtube.com/watch?v=FKiIjhyptVA&feature=youtu.be http://www.youtube.com/watch?v=FKiIjhyptVA&feature=youtu...
• baby 14y ago
  by the way, 1 billion = 1 milliard I was very confused since only the USA, Canada and the UK use 1 billion = 1 milliard instead of 1 billion = 1k billiard
• andrewhillman 14y ago
  Those investors who passed on the recent round must be kicking themselves. This one has gotta sting. Ouch!
• ChuckMcM 14y ago
  This is an interesting take: http://www.latimes.com/business/technology/la-fi-tn-why-facebook-bought-instagram20120409,0,7157117.story http://www.latimes.com/business/technology/la-fi-tn-why-face... Which basically has Facebook buying them because of the social traction. Suggesting that perhaps they did not want this to be part of Google+ which has a lot of pictures but not the same as Instagram does with the social connection.
• louhong 14y ago
  According to Wired.com the CEO is taking about $400 of the Billion. Source: http://www.wired.com/epicenter/2012/04/facebook-buys-instagram/ http://www.wired.com/epicenter/2012/04/facebook-buys-instagr...
  • pbhjpbhj 14y ago
    "$400 Million", FTFY.
• michaelkscott 14y ago
  How many people work at instagram?
  • Kopion 14y ago
    12 http://www.linkedin.com/search/fpsearch?companyId=2289109&sortCriteria=R&keepFacets=&facet_CC=2289109 http://www.linkedin.com/search/fpsearch?companyId=2289109&#3...
• iscrewyou 14y ago
  You know what I'm afraid of? Facebook doing to Instagram what they did to Beluga. At work, we used Beluga to communicate about work related stuff. Facebook bought it, shut it down and turned it into Facebook Messenger. Goes without saying but we didn't move our conversations/groups over to Facebook Messenger. I really hope Instagram doesn't get treated the same way. That's all.
• hjhjhj 14y ago
  Best quiet period PR stunt ever.
  • Shank 14y ago
    Reminds me of when Google launched the official Google Blog during quiet period, then proceeded to post recipes for chicken on there.
• philjackson 14y ago
  No, Zuck. I meant the app...
• tlogan 14y ago
  Somebody was saying that Facebook has issue with mobile - I guess they solved the problem now.
• rshl 14y ago
  I think there's a great lesson here: It takes only 2 years and 13 people to overtake one of Facebook core features. And that's talking about a company that suppose to have the best programmers and designers in the world. That's something you should remember next time someone's tells you that Facebook/Google/Microsoft will do it better.
• EGreg 14y ago
  Oh man. I could have made a billion dollars by making stuff like this. Instead I am building a long term value company like Apple. Steve Jobs may have been proud. :)
• HSO 14y ago
  This is the Netscape IPO of the app economy.
• Alind 14y ago
  Congrats. Just deleted this account.
• pmarsh 14y ago
  I am not an Instagram user, but after checking it out on my Android though it seems like if FB was playing keep away it was more likely to be trying to keep it out of Twitter's hands.
• joelmaat 14y ago
  This situation reminds me of when Facebook was worried about Twitter: most of the worry ended up being unfounded. I guess I shouldn't be surprised that Facebook was eyeing Instagram, as Facebook's photo viewing UI is now fairly similar to Instagram's. But I wonder if the worry about Instagram merited the $1B exit. Either way, given how small the Instagram team is, they must feel mighty satisfied right now.
• eyeareque 14y ago
  $1 billion divided by 30 million users = 33.30 dollars. I had no idea my account was worth that much.
• jot 14y ago
  Ask yourself not whether Instagram is worth $1 billion but whether Instagram is as valuable as 1% of Facebook. Sounds about right to me.
• acak 14y ago
  Given that a majority of the Instagram users (~30M) are on iOS, what if Apple decides to give away iPhoto for free? Or better yet, make it the default photo app on iOS? iPhoto is not half bad. http://itunes.apple.com/us/app/iphoto/id497786065?mt=8 http://itunes.apple.com/us/app/iphoto/id497786065?mt=8 Even if it's made the default photo sharing app in the next release for iOS 5+ users for whatever reason, and integrated deeper come iOS 6 this summer, they'd instantly have access to several times Instagram's userbase. They could using this as a bargaining chip in their negotiations to integrate FB into iOS / iTunes. Because Facebook, a public company, cannot have a $1B acquisition become irrelevant in a couple of months.
• deleted 14y ago
  [deleted]
• dpcheng2003 14y ago
  HN is full of haterpraise today. http://www.davidpcheng.com/post/20808337202/instagram-and-the-art-of-haterpraise http://www.davidpcheng.com/post/20808337202/instagram-and-th...
• JoeCortopassi 14y ago
  I think the point that everyone is missing here, is how heavily integrated Instagram is in non-Facebook social networks (i.e. twitter and Flickr). Yes, part of the valuation was due to Instagram being an up and coming social network. But the main value of this acquisition comes from the fact that, with this single purchase, Facebook is able to leverage multiple social network's userbases into their own. From captain Zuck's post on Facebook "We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience." (https://www.facebook.com/zuck/posts/10100318398827991 https://www.facebook.com/zuck/posts/10100318398827991)
• beedogs 14y ago
  $1 billion for something literally no one uses. Web bubble 2.0 can't burst soon enough.
  • tlrobinson 14y ago
    I don't think you know the definition of "literally".
• minikomi 14y ago
  A thought experiment : What if Facebook is making their own phone.. And the phone's camera basically is instagram?
• MrTibbles 14y ago
  Why is this news? Who cares? seriously, this matters less than cankles on an elephant. Grow up people.
• guynamedloren 14y ago
  A billion dollars is an interesting sum. Any bets on whether the Instagram founders told Mark Zuckerburg, "A million dollars isn't cool. You know what's cool? A billion dollars." That'd be epic.
• coenhyde 14y ago
  I believe this is a bit of a pony show. Facebook will have its IPO soon with an expected valuation of $100billion. A move by Facebook to buy Instagram for $1 billion works in Facebook's favor by positioning public opinion in the following ways: 1. If Facebook has $1 billion to spend then they must be making a lot of money. 2. If Instagram is worth $1billion then surely Facebook is worth $100 billion.
• tucson 14y ago
  Does anyone have an estimate of Instagram current yearly profit (or loss)? (sorry for the basic question, I do not know much about their service)
• lindstorm 14y ago
  Looks like this acquisition was in their business plan.
• gsharm 14y ago
  Smart move by Facebook. If Google had bought Instagram instead and integrated with G+, things would have gotten interesting. Wouldn't be surprised if there was a bidding war that pushed the price this high. Reminds me of the recent Firefox deal.
• mkramlich 14y ago
  The best argument I've seen for justifying this is as a way for Facebook to neutralize one potential medium-term strategic threat. That said, they still probably overpaid. Who knows how much of an element of behind-the-scenes investor favors-calling-in-favors went on as well. The whole indirect "Let's get into Facebook, pre-IPO" angle, which also sounds plausible.
• imd23 14y ago
  Great, now the biggest question is whether build for growing in users or be profitable from day one, or both. AFAIK instagram didn't make any cent. Premium filters and and ads would be the first choice, but I heard they decided to focus and grow in people loving their product. Another big thing to deal with is: to sell or not?