Why is Instagram worth 1 billion

Facebook buys Instagram : A billion dollars for an idea

It's the next big deal in the internet industry, and it's a blow for Facebook. With the purchase of the Instagram photo service for one billion dollars (760 million euros), which Facebook - as briefly reported - announced on Monday evening, the online group is reaching for a rising star in the social media economy. Facebook dares the spectacular takeover of a company that has not yet made any sales or profits a few weeks before going public. Payment is to be made with own shares and in cash.

Photos taken with a smartphone can be shared with friends and acquaintances free of charge via Instagram. The highlight: The application (app) has built-in filters with which you can trim an image to old or distort the colors. In addition to Facebook, Instagram also cooperates with Twitter or the mini blog service Tumblr.

With 30 million users, the company is tiny compared to Facebook (850 million), but experts speak of a potential threat the company poses to the world's largest online network. Because Instagram is growing at breakneck speed and has just raised $ 50 million from investors who value Instagram at around $ 500 million in total. Facebook, itself worth 100 billion dollars, pays a premium of 100 percent to incorporate the photo platform.

Facebook boss Mark Zuckerberg justified the high price with the strategic importance of the takeover. The purchase of Instagram is an "important milestone for Facebook," said Zuckerberg. “For the first time ever, we have acquired a product and a company with so many users.” The Instagram founders Kevin Systrom and Mike Krieger were also delighted: “We are thrilled to join Facebook,” explained Systrom. The photo app will be retained. "Instagram will not go away," emphasized Systrom. "We will work with Facebook to develop Instagram further."

According to the developers, the application for smartphones and tablet PCs has been downloaded more than 30 million times since the end of 2010. In 2011, Apple named Instagram Application of the Year. The photo app was recently released for smartphones based on Google's Android operating system - it was downloaded more than a million times in the first 24 hours.

"The purchase was a defense measure," said Ralf Kaumanns, managing director of the market research service Strategyfacts.com, the Tagesspiegel. "If Google or Twitter had struck Instagram, it would have been a hard blow for Facebook." For Facebook, the acquisition is also a way of keeping the competition at a distance - for example the social network of Google, Google+, or the virtual pin board Pinterest, which enjoys a rapid influx.

Publishing your own photos on Facebook and sharing them with others is one of the most important functions of the website in terms of volume, said Ralf Kaumanns. Although Instagram does not have a profitable business model, the service is extremely successful. “This is also due to the ease of use,” said Kaumanns. "With Facebook's own app, you have to click six times to upload a photo to the network - only once on Instagram."

Free, fast and especially popular with the mobile and online community: Instagram has all the characteristics a successful internet company needs. Nevertheless, many observers puzzled on Tuesday what business sense the takeover would make. The purchase raises one question after the other, "and the biggest is: Why?" Wrote the US online service CNET in an initial analysis. "I think Facebook panicked," an industry observer told Fortune magazine. “So it decided to swallow the competitor before it could get too big.” Measured against Facebook's expected market value of $ 100 billion, the price doesn't seem so high anymore: “To sacrifice one percent of the company's value to the greatest threat turning it off is a smart move, ”said Internet investor Chris Dixon. with AFP / dpa

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