It really is Facebook's greatest acquisition ever, in both price and achievement. With about 30 million active users, Instagram has the largest target audience of any startup Facebook has bought, Facebook CEO Mark Zuckerberg said in a blog post.
"We don't plan on doing many more of these, if any at all," Zuckerberg wrote. "But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."
Started in 2010 by Mike Krieger and Kevin Systrom, Instagram has just a handful of employees assisting its wildly popular photo app, that lets users add distinctive filter systems and graphic flair to photos they've clicked on their smartphones.
The long-awaited Android version, launched last week, racked up more than 1 million downloads in just 12 hours. The release also met a backlash from iPhone users, who loved having an unique hold on the stylish service.
Merely one month ago, Instagram's creators stated they had no interest in selling.
"We're pretty focused on remaining an independent company right now," Instagram cofounder Systrom told CNNMoney at South by Southwest, where the company delivered a talk on its wild growth.
Even several of Instagram's buyers were startled by the takeover. Late last week, Instagram closed a $50 million funding round that valued the company at $500 million, according to a source involved in the deal.
Those investors essentially doubled their money, immediately.
Facebook wants to scoop up hot online companies, kill their products, and redeploy their staff on other jobs. That's definitely not the plan for Instagram, all the players insist.
"It's important to be clear that Instagram is not going away," Instagram's founders wrote on their company blog. "We'll continue to add new features to the product and find new ways to create a better mobile photos experience."
Zuckerberg hard pressed the point.
"We're committed to building and growing Instagram independently," the CEO said. "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, which is in the process of going public, ended 2011 with a cash stash just shy of $4 billion.
It's paying large price for a startup that has lots of buzz but no business model. Here's a fun assessment: Yahoo (YAHOO, Fortune 500) paid out just $35 million Seven years ago for Flickr, which stays one of the Web's most well-known photo networks.
Instagram is a free app and doesn't demand for any of its services. The company's founders insisted that would come in time, once they'd built a sizeable consumer base.
Instagram was their 2nd stab at a product. Before "pivoting" to create the wildly popular photo sharing app, the crew was working on a check-in program called Burbn.
"I remember what I'll call 'pivot day.' We sat down and said 'what are we going to work on next? How are we going to evolve this product into something millions of people will want to use?'" Systrom said last year. "What is the one thing that makes this product unique and interesting?"
The solution they hit on was "photo sharing," and the result was Instagram.
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