World and Nation

Facebook buys popular photo app Instagram for $1 billion

SAN FRANCISCO — Facebook took steps Monday to bolster its mobile strategy, acquiring popular photo-sharing application Instagram for about $1 billion in cash and stock.

The purchase, the social network’s largest and the most expensive by far for a smart phone app, gives Facebook a company that’s adept at producing mobile apps as well as a passionate community of more than 30 million users. It also neutralizes a potential competitive threat from the San Francisco startup, whose 28-year-old co-founder has talked about building a large global business.

The move comes on the eve of an expected initial public offering from Facebook that could value the Menlo Park company at $100 billion.

Facebook CEO Mark Zuckerberg noted that the deal was unusual for a company that traditionally has bought startups primarily for their engineering talent. The price tag makes it one of the priciest startup acquisitions ever, in the same league as Google’s purchase of YouTube for $1.65 billion in 2006. The acquisition came before Instagram began generating any significant revenue. While it planned to eventually include some form of advertising inside the app, the company had yet to implement any.

That didn’t stop Instagram from closing a new $50 million round of funding just last week that valued the company at $500 million, according to tech websites All Things D and TechCrunch.

“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,” Zuckerberg said in a Facebook post. “We don’t plan on doing many more of these, if any at all.”

Instagram proved irresistible to the social networking giant because of its shared interest in top-notch photo-sharing experiences, Zuckerberg said.