When it was announced a couple of months ago, the Facebook acquisition of Instagram certainly dropped a few jaws. The social networking site had announced that it would be acquiring the internet photo service that had around 80 million years for a whopping sum of $1 billion instantly making the dozen or so employees of the small start up instant millionaires. There was wide speculation as to why Facebook would pay such an astronomical sum for a company that though popular could have easily been bought for far less. Of course this was at a time when Facebook was trying to beef up its own portfolio in anticipation of its IPO, with the firm acquiring numerous patents from Microsoft and others during that time to present an impressive portfolio to potential investors.
But the IPO did not got plan as though offering an initial share price of $37, the stock market barely warmed up to the new flotation and suffering a near abysmal response, with the share price dropping to nearly half its initial value, Facebook possibly bit off more than it could chew.
Perhaps that’s why the Instagram acquisition has gone on ahead but at a sum lower than the initial $1billion. After wrangling for months with the Office of Fair Trading (OFT) and Federal Trade Commission (FTC), Facebook has finally completed its purchase of Instagram and doled out a sum of $715 million for it. The reduced sum is apparently because of the investigation by the OFT and FTC that directly ensued from Facebook’s offer with the two authorities having concerns about Facebook’s potential monopoly of photo uploads. An OFT spokesperson said, “From the evidence we received it didn't suggest that the parties would have the interest to pursue that (monopolisation) as a strategy."
The $715 million purchase price will be rendered to Instagram in the form of $300 million cash and 23 million Facebook shares. Commenting upon the deal being closed, Instagram said on its blog, “What makes this even more exciting is that our deal with Facebook has closed, which means we can now work together to evolve and build a better Instagram for everyone. While our team is making the short move to the Facebook offices, Instagram isn’t going anywhere. The Instagram app and its features will stay the same one you know and love, and we’ll keep working together to build a better Instagram for everyone.”
Meanwhile Facebook said in a statement that it would allow Instagram to continue running as an independant unit, “Instagram will continue to serve its community, and we will help Instagram continue to grow by using Facebook's strong engineering team and infrastructure.”