Facebook pre-empts rivals with $1bn deal

Facebook’s stunning decision to pay $1bn in cash and stock for photo-sharing platform Instagram has raised suggestions it did the deal to absorb a potential rival — or pre-empt a move by a rival such as Twitter.

The deal for the two-year-old company marks a change in strategy for Facebook and is the site’s largest ever acquisition. It comes just months before Facebook floats on the stock exchange.

The price was stunning for an apps-maker without any significant revenue, even when measured by the lofty standards of Silicon Valley, where start-up valuations have soared in recent years.