This week is shaping up to be the week of tech mergers and acquisitions. Shortly after Microsoft Inc. (MSFT) announced its acquisition of more than 800 patents belonging to AOL Inc. (AOL), Facebook announced its own billion-dollar acquisition deal: It is buying Instagram, a popular photo-sharing app.
Now, what’s crazy about this price tag is that Instagram is a startup with only a handful of employees and no sales. However, Facebook is willing to pay a cool billion for Instagram because it is becoming wildly popular among mobile phone users. It has 30 million users, primarily using its iPhone app, and less than a week ago Instagram released an app that was compatible with the Android. In just six days, the new version netted five million downloads! Experts consider Instagram one of the most popular social networks around—third only to Facebook and Twitter. And, because it is a mobile-only app, this acquisition should boost Facebook’s appeal to mobile and tablet-only users.
In February, Facebook users uploaded some 250 million photos a day to the network, and the added functionality of Instagram should further encourage photo sharing. And, considering that Facebook’s bread and butter is the information that its users share with each other to use in advertising, this is a savvy move. Facebook is clearly hoping to pique investor interest before its widely anticipated initial public offering (IPO), and so far it’s working. I’ll continue to monitor Facebook as its IPO draws closer, but in the meantime let’s enjoy the interest that this move has generated among investors.
Until next time!