In April 2012, Facebook acquired the popular photo-sharing app Instagram for $1 billion. At the time, Instagram had only 13 employees and no revenue, but had grown rapidly to over 30 million users since launching in October 2010. The acquisition was Facebook’s largest at the time and signaled the social media giant’s focus on mobile and visual content. Let’s take a closer look at when and why Meta (formerly Facebook) bought Instagram.
The History of Instagram Leading Up to the Acquisition
Instagram was founded in October 2010 by Kevin Systrom and Mike Krieger as a free mobile app that allowed users to take photos, apply filters, and share them on social networks like Facebook and Twitter. Here is a brief timeline of Instagram’s growth and key milestones prior to being acquired by Facebook:
| October 2010 | Instagram launches on iOS |
| December 2010 | 1 million registered users |
| February 2011 | Android app launches |
| September 2011 | 10 million registered users |
| April 2012 | 30 million registered users and acquisition by Facebook announced |
In less than two years, Instagram saw tremendous growth. Its user base was expanding rapidly and engagement was high, with users liking over 1 billion photos by March 2012. The app had successfully tapped into people’s desire to capture and share visual content, especially on mobile devices. However, monetization efforts were still minimal at the time of acquisition.
Why Did Facebook Want to Acquire Instagram?
For Facebook, acquiring Instagram in 2012 aligned with several of their strategic goals:
- Expanding into mobile: Instagram was primarily a mobile app, allowing Facebook to expand its mobile presence.
- Visual content: Instagram was focused on photo/video sharing, appealing to Facebook’s increased emphasis on visual content.
- Data and insights: Facebook would gain valuable data and insights into users and content trends from Instagram’s rapidly growing user base.
- Competition: Buying Instagram eliminated a potential competitor in photo/video social networking.
- Younger demographics: Instagram’s user base skewed younger, which expanded Facebook’s reach.
Essentially, Facebook saw Instagram’s current success and future potential in mobile photo sharing. While expensive, they viewed it as a strategic long-term investment.
The Acquisition Deal
The deal for Facebook to acquire Instagram was announced on April 9, 2012 for an estimated $1 billion. Key details of the deal included:
- All-cash deal valued at around $1 billion.
- Facebook offered $300 million upfront and the rest in stock and cash.
- Facebook committed to keep Instagram independent and allow it to grow.
- Regulatory approval was needed to finalize the deal.
The deal was seen as expensive given Instagram’s small size and lack of revenue. However, Facebook CEO Mark Zuckerberg noted Instagram’s incredibly fast growth and called it “wildly impressive.” Zuckerberg said acquiring Instagram would help Facebook offer more engaging mobile experiences.
The deal was unanimously approved by Facebook’s board and also supported by Instagram’s founders and investors. While expensive, most saw it as a worthwhile move by Facebook to continue expanding its reach, especially on mobile.
Aftermath of the Acquisition
Facebook’s acquisition of Instagram closed in late September 2012 for around $715 million after receiving regulatory approval. Instagram continued operating as an independent app, with Facebook providing financial support and resources to aid growth.
In the years since the acquisition, Instagram has grown exponentially:
- Over 1 billion monthly active users as of 2018
- Launched advertising capabilities in late 2013
- Expanded to include Stories, IGTV, Reels, shopping and more
- Remains one of the most popular mobile apps worldwide
Facebook has benefited from Instagram’s continued expansion, using the app’s data to improve ad targeting capabilities and offerings like Instagram shopping. The acquisition is now viewed as one of Facebook’s smartest investments, providing a strong foothold in mobile photo/video sharing and visual content.
Conclusion
Facebook’s acquisition of Instagram in April 2012 for $1 billion was a landmark deal in the social media/tech industry. It provided Facebook with a leading presence in mobile photo sharing, which was quickly growing in popularity. Since the acquisition, Instagram has grown to over 1 billion monthly users and become a highly strategic part of Meta’s product portfolio. The deal is now seen as a huge success, with Instagram valued at over $100 billion currently. It gave Facebook a key role in the shift to mobile while expanding its reach among younger users. While controversial at the time due to cost, the acquisition of Instagram gave Facebook long-term competitive advantages that were incredibly valuable.