Billion dollar question for social network

Four theories on why Facebook spent $1bn on Instagram:

1. Facebook immobilised its greatest threat

Facebook’s biggest competitors aren’t fellow tech titans Google and Twitter, says Nicholas Carlson at the website Business Insider. Facebook’s main attraction is allowing users to share photos, but the social network is “not the easiest way to share photos of your friends and family over your phone”. Instagram was killing Facebook in that respect, and Facebook couldn’t let that “insurgency” fester.

Now, Facebook might kill Instagram, says Laurie Segall at CNN. Chief executive Mark Zuckerberg insists that Instagram will remain an independent entity, but Facebook “likes to scoop up hot start-ups, kill their products, and redeploy their staff on other projects”.

2. Facebook needed to break in to the smartphone market

Facebook won’t kill Instagram now that the purchase has made it a formidable player in the smartphone arena, says Evelyn Rusli at The New York Times. Mobile phones have always been a “weakness for the sprawling social network”, and now it owns “one of the most downloaded applications on the iPhone”.

3. Facebook wanted to sink Yahoo

The biggest loser in this deal is Yahoo, which owns rival photo-sharing site Flickr, says Bruce Upbin at Forbes.

Facebook just redefined its place in the photo-sharing market, much as Google did in terms of video-sharing when it upended that market by buying YouTube. By swallowing Instagram, Facebook just “put the nail further in Yahoo’s coffin”.

4. Facebook is strengthening itself prior to its IPO

Facebook is bolstering its offerings prior to its first stock sale, expected to rake in $5bn (€3.8bn) in a few weeks, says Bloomberg’s Douglas MacMillan. Furthermore, Facebook proved to investors it’s in it for “the long haul”, by showing it has “the ability and the stomach to pull off huge seven-figure deals”, says Carlson.