Facebook is not waiting for its initial public offering to make its first big purchase.
In its largest acquisition to date, the social network has purchased Instagram, the popular photo-sharing application, for about $1 billion in cash and stock, the company said Monday.
It’s a notable move for Facebook, which has exclusively focused on bite-size acquisitions, worth less than $100 million.
With Instagram, Facebook will get a formidable mobile player – an area that is seen as a weakness for the sprawling social network. Founded two years ago, the service — which lets users share photos and apply stylized filters – has become one of the most downloaded applications on the iPhone, with some 30 million users. Instagram released a version of its application for Google’s Android operating system last week.
On Monday, both companies expressed their commitment to run Instagram as an independent service.
Pool photo by Yuriko NakaoMark Zuckerberg, the chief executive of Facebook, which is expected to go public next month.
In a post on his profile page, Facebook’s chief Mark Zuckerberg said Instagram would continue to work with rival social networks. That will allow users to post on other services, follow users outside of Facebook, and to opt out of sharing on Facebook.
“For years, we’ve focused on building the best experience for sharing photos with your friends and family,” Mr. Zuckerberg wrote. “Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.”
In a separate blog post on Instagram’s Web site, the company’s chief executive, Kevin Systrom, also reiterated plans to preserve the service’s functionality and said he looked forward to leveraging the new parent company’s resources and talent.
The announcement comes as Facebook prepares for its highly anticipated initial public offering, widely expected to take place next month.
Though Facebook is known for smaller acquisitions, Instagram’s surging momentum likely compelled the social network to swiftly put together a billion-dollar offer. Last week, Instagram, which has just a handful of employees, closed a financing round worth more than $50 million with several prominent investors, including Sequoia Capital, an early backer of Google, Thrive Capital, the firm run by Joshua Kushner, and Greylock Capital, an early investor of LinkedIn. AllThingsD first reported last week that Sequoia was in the process of leading a $50 million round in Instagram.
That latest funding round valued Instagram at about $500 million, according to one person with knowledge of the matter, who requested anonymity because discussions were private. Facebook’s purchase, one week later, means that investment has now doubled in value.
The deal is expected to close later this quarter, according to Facebook’s statement.
Here is the news release from Facebook:
“Facebook announced today that it has reached an agreement to acquire Instagram, a fun, popular photo-sharing app for mobile devices.
“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.”
Mark Zuckerberg, founder and chief executive of Facebook, posted about the transaction on his Facebook page:
“I’m excited to share the news that we’ve agreed to acquire Instagram and that their talented team will be joining Facebook.
“For years, we’ve focused on building the best experience for sharing photos with your friends and family. Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.
“We believe these are different experiences that complement each other. But in order to do this well, we need to be mindful about keeping and building on Instagram’s strengths and features rather than just trying to integrate everything into Facebook.
“That’s why 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.
“We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience. We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook.
“These and many other features are important parts of the Instagram experience and we understand that. 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.
“This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. 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.
“We’re looking forward to working with the Instagram team and to all of the great new experiences we’re going to be able to build together.”