Facebook buys Instagram for $1 billion

Facebook is buying Instagram, maker of a popular mobile photo-sharing app, for $1 billion in cash and stock.

Mark Zuckerberg, Facebook’s co-founder and CEO, announced the deal today on Facebook. The purchase comes as Facebook prepares for its initial public offering, which is expected later this spring.

“For years, we’ve focused on building the best experience for sharing photos with your friends and family,” wrote Zuckerberg. “Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.

“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,” he added. “We don’t plan on doing many more of these, if any at all.”

The mobile app originally was only available for use on the iPhone, but now it can also be used on Android devices.

Zuckerberg also made it clear that he wants Instagram to remain independent, noting that Instagram users will be able to continue posting their photos to other social networks, such as Twitter, and won’t have to share their photos on Facebook.

Buying Instagram is a smart move for Facebook, said Dan Olds, an analyst at Gabriel Consulting Group.

“Instagram can potentially help Facebook in several ways,” he noted. “First, there are something like 10 million Instagram users out there — the vast majority of whom are using it to post to Facebook. Owning Instagram will allow Facebook to more tightly integrate [Instagram’s] capabilities and functions into the fabric of Facebook.”

Tighter integration will give Facebook more information about what people are doing with Instagram — and Facebook will then have an opportunity to analyze and monetize that data, Olds said.

“It could also give Facebook a building block they can use to put together their own Pinterest-type app, which is sort of a natural for Facebook, I think,” he said.

Patrick Moorhead, an analyst at Moor Insights & Strategy, said Facebook will need to expand on what Instagram can do.

“This is a smart move for them as long as they integrate as a distinct brand and continue innovating,” said Moorhead. “Otherwise, it will become a lifeless Flikr repeat.”

Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, or subscribe to Sharon’s RSS feed . Her email address is sgaudin@computerworld.com.