For $1.1 Billion, Facebook Snaps Up Instagram

Success for the popular photo-sharing app Instagram has been sudden and dramatic. Founded in 2010 by two Stanford University graduates, it now has 27 million users.

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STEVE INSKEEP, HOST:

Facebook likes Instagram - that's the top of our business news.

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INSKEEP: And they did more than just click on the little thumbs up. Facebook is buying the photo application Instagram, and the price is higher than it has ever paid for an acquisition - $1 billion; this for a company with only around a dozen employees. As somebody joked yesterday, why didn't they just download it?

As NPR's Laura Sydell reports, some analysts say the purchase is a defensive move.

LAURA SYDELL, BYLINE: Instagram is a mobile app that lets you put filters on your photos to make them sepia toned or look like an old western, and share the pictures with friends.

Analyst Patrick Moorhead says the site was a creative breakthrough for mobile.

PATRICK MOORHEAD: It allowed people's artistic beauty, or artistic sense come out - or lack of artistic sense come out, in a way that nothing had done before.

SYDELL: Instagram drew 30 million users in less than two years. Great for Instagram, but Moorhead says Facebook saw a challenge. The popular social network has been the leading player in photo-sharing.

MOORHEAD: Facebook bought this as a defensive move to not lose a huge amount of customers off of Facebook.

SYDELL: In a blog post, Facebook CEO Mark Zuckerberg promised to let Instagram remain independent. However, many Instagram customers were skeptical.

On Twitter, people were giving advice, like how to delete your Instagram account. And though $1 billion for a company with a dozen employees may sound like a hefty price, analyst Moorhead points out it's still only 1 percent of Facebook's valuation.

Laura Sydell, NPR News, San Francisco.

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