How Instagram Became a Great Strategic Fit for Facebook

What's in Store for Facebook: A Must-Read Investor's Guide

(Continued from Prior Part)

Facebook’s Instagram acquisition boosts its mobile offerings

Mobile use has been critical to Facebook’s (FB) user growth and engagement. Accordingly, Facebook has always prioritized mobile product development. This is the reason why Facebook acquired Instagram, a photo-sharing app, in 2012 for approximately $1 billion in cash and stock. Importantly, Instagram remained an independent platform and retained its applications and user base.

Instagram is a photo and video sharing app where users can take pictures and videos and share them on the app as well as through other platforms like Facebook, Yahoo’s (YHOO) Tumblr, and Twitter (TWTR).

As Facebook’s largest acquisition at that time, the deal saw some criticism for the high price Facebook paid for a company that had no revenue. However, the deal was a great strategic fit for Facebook’s mobile offering while removing a potential rival. Instagram, which had 30 million registered users at the time of acquisition, has now grown to a strong 400+ million monthly active users (or MAUs), which in itself is more than Twitter.

Brief history and stats

Founded by Kevin Systrom and Mike Krieger in October 2010, Instagram was an instant hit. The mobile photo-sharing app gained 1 million users in just two months. Currently, more than 75% of the users are outside the US with countries like Brazil (EWZ), Japan, and Indonesia growing at a rapid rate. In addition, Facebook’s Instagram now has more than 400 million MAUs who send 3.5 billion likes a day, along with more than 80 million daily photos.

Facebook invested heavily to develop Instagram

Facebook invested heavily in order to improve the speed and performance of Instagram on Android after the acquisition. Instagram launched the Hyperlapse app on Apple’s (AAPL) iOS to capture high-quality videos even while in motion.

According to Instagram, “Traditionally, time lapse videos depend on holding your phone or camera still while you film. Hyperlapse from Instagram features built-in stabilization technology that lets you create moving, handheld time lapses that result in a cinematic look, quality and feel—a feat that has previously only been possible with expensive equipment.”

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