Facebook’s acquisition of Instagram is more than a $1 billion deal that’s making CEO Kevin Systrom some $400 million, and his 12 employees $100 million split among them. It’s also Facebook’s biggest acquisition to date, is sure to set off another round of hand-wringing over startup valuations and, as the Los Angeles Times says, has “grabbed the world’s attention” the way Google’s acquisition of YouTube did.
“It’s unprecedented on almost any metric you look at,” Kauffman Foundation Senior Fellow Paul Kedrosky told the Times. Aside from its small headcount, the company has no revenue and no business model. “That’s going to make some people’s eyes roll back in their heads and connect to their ears,” he said.
Given that it comes as the company runs up to its IPO, getting the deal done was obviously a priority for Mark Zuckerberg & Co.
For Facebook, the acquisition accomplishes several things: First, it neutralizes a thriving competitor in the increasingly vital mobile space. CNET reports that in its two years, the company has already gathered 33 million users. Its Android version was downloaded 1 million times the day it was launched. By bringing Instagram into the fold, Facebook gets the excitement and momentum the product generates, along with its photo-sharing and messaging capabilities.
Also, other social networks were eyeing Instagram as an acquisition target. Now, it’s off the board.
On his Facebook page, Zuckerberg says Facebook is “committed to building and growing Instagram independently.” He also said the company doesn’t plan to do many similar deals, where it acquires someone with “so many users.”