Instagram has grown quickly and now boasts 30 million users who love the app's old school filters and its ability to share photos across multiple social media sites, including Facebook, Twitter and Tumblr. But Facebook shelled out $1 billion for a reason beyond aesthetics.
Social media experts say Facebook's $1 billion acquisition also provides valuable information about users' personal interests.
"I'm taking photos of snowboarding and I tag that as snowboarding; I'm taking photos of certain cars and I tag that; Facebook is now going to be able to tap into that data, which really makes their ability to targeted advertising even richer," Wildfire founder and CEO Victoria Ransom said.
Photos taken by Instagram users are searchable and often posted on business website to promote popularity and spread brand awareness. Facebook is believed to be going public next month and the Instagram deal will give it even more value.
Facebook CEO Mark Zuckerberg wrote on his Facebook Timeline, "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."
Analysts don't believe Facebook is done with acquisitions.
"You can't believe that, so the reality is they're going to spend the money as they see fit when they see fit; looking off to the future, they are or aren't going to do something like this just isn't credible," tech analyst Rob Enderle said.
Instagram has only 13 employees. Its two co-founders own 50 percent, so they will get $500 million. The rest will go to early investors and perhaps some of the employees.
Instagram users won't see major changes. They can still post to non-Facebook social media sites.
"For Instagram users, it shouldn't affect their user experience a whole lot," Ransom said. "I imagine Facebook's going to learn a lot from Instagram and potentially put that functionality into their own photo sharing experience."
The $1 billion deal has some people puzzled and others cheering for Facebook. By contrast, Yahoo bought Flickr for $30 million and Google picked up Picasa for $5 million.