Why Did Facebook Buy Instagram?

Why Did Facebook Buy Instagram?
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Facebook (FB) has launched a photo sharing app for Apple’s (AAPL) iPhone, Facebook Camera for iPhone. Why, then, did Facebook spend $1 billion on Instagram if it knew this was in the works?

Looking at the product page, it’s not quite clear why Facebook paid a significant amount of money and stock for the popular Instagram, when it was going to announce a strikingly similar product of its own.

Facebook has touted the fact that it has over 300 million photos uploaded to its site every day, so clearly this is a core feature for the social networking giant. Perhaps CEO Mark Zuckerberg bought Instagram because of fears that users would navigate away from the site, hurting a core part of Facebook’s business.

A Facebook spokesman declined to comment on whether the new app would affect their plans for Instagram in the future, saying the deal had not yet closed.

The new app makes photo sharing easier, Facebook said, allowing users to share multiple photos at once, caption the picture, tag it and put your location on it.

It remains to be seen why Facebook bought Instagram if this project was in the works. It’s not like the new iPhone app came together overnight. More likely, this has been a project that Facebook has been working on for months, which is only just seeing the light of day.

Instagram, of course, has become incredibly popular. Over 50 million users use the app to snap photos, apply filters to their shots, and share the pictures with their friends.

If there’s one thing Wall Street and investors hate, it’s uncertainty, particularly in the aftermath of a massive $1 billion acquisition. Expect Zuckerberg and his team to answer questions on the newly-public company’s camera strategy or, potentially, face some very unhappy shareholders.

The Street

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