What Does Facebook Gain From Buying Instagram?

If you haven't heard already, Facebook bought Instagram for $1 billion dollars.

There's a lot of speculation about why Facebook—who hasn't collected a penny from their IPO—would spend such a huge amount of money for a company that may–or may not produce any revenue.

From ZeroHedge:

Facebook has not even collected the cash from going public and it is already precommitting funds to expand growth (what's wrong with its organic growth? Not good enough?) by purchasing tangential services, such as everyone's favorite photo filtering application Instagram for the ridiculous price of $1 billion (a company which completed its Series A round 14 months ago for a $20 million post-money valuation). In other words, FB hasn't even flash dashed (or crashed - thank you BATS) yet, and it is already facing Traffic Acquisition Costs, because with 30 million users, assuming none of them use Facebook, each user just cost Facebook $33.333 (and realistically much more since virtually everyone who uses Instagram uses Facebook). Click here to read more from ZeroHedge

It's possible Facebook make the acquisition to expand their user-base—Instagram has 30 million users and a super easy to use (and addictive) photo sharing iPhone and Android app.

But Facebook already has users—850 million and counting. They don't need more users.

So Why Did Facebook Buy Instagram?

Here's my favorite reason. From Om Malik at GigaOm:

My translation: Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook's achilles heel — mobile photo sharing.

Essentially, Facebook spent $1 billion dollars to compete on mobile devices. Think about that for a second.

Where does mobile fit into your business and marketing efforts?

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