Panic buy a worrying sign for investors

Facebook’s defensive purchase of Instagram raises a red flag.

Online photos are supposed to be a core Facebook competence. Paying $1bn (€760m) for the popular picture-sharing app may boost the social network in mobile but paying over the odds for revenue-free rivals is usually the hallmark of anxious, mature firms — not a growth company seeking to go public for billions.

It’s impossible to say exactly what Facebook gets for the oodles of cash and stock it is handing over to Instagram, founded just two years ago by Kevin Systrom and Mike Krieger.