How much did facebook pay for instagram

Top 5 Companies Owned by Facebook (Meta)

Photo and video-sharing, virtual reality, and messenger services

Nathan Reiff

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Nathan Reiff has been writing expert articles and news about financial topics such as investing and trading, cryptocurrency, ETFs, and alternative investments on Investopedia since 2016.

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Updated October 16, 2022

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Reviewed by Margaret James

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Meta Inc. (META), the company which owns Facebook, the world's largest social networking website, was founded by CEO Mark Zuckerberg and several Harvard College roommates in 2004. The company's name initially was FaceMash, which was changed to TheFacebook, eventually dropping "The" from its name to become Facebook, before being changed yet again to Meta in Oct. 2021. Zuckerberg and his co-founders initially launched the service for their Harvard classmates, quickly expanding it to other universities and then to the general public. The company since then has grown into a global giant with 2.8 billion users and a market cap of $926.8 billion. The company reported FY 2020 net income of $29.1 billion on $84.1 billion in revenue, nearly all of which came from advertising.

Meta has expanded far beyond its original social networking platform since its founding 16 years ago. Its products also include messenger services, photo and video sharing, augmented reality, and many other apps and services. Acquisitions have been key to growing these businesses and Meta's revenue in general. Meta's strategy has been to buy potential rivals before they can get too big. In the process, the company sometimes has paid exceptionally high prices for some deals. The company has also drawn attention from the Federal Trade Commission (FTC) due to potential anticompetitive practices, with the FTC recently demanding data on unreported purchases from Meta as well as other big tech companies.

Below, we look in more detail at Meta's 5 biggest acquisitions. The company does not provide a breakdown of how much profit or revenue each acquisition currently contributes to Meta.

Instagram

Type of Business: Photo and video-sharing app
Acquisition Cost: $1.0 billion
Acquisition Date: April 9, 2012

Instagram is a photo and video-sharing social networking platform that was launched in 2010. Through the Instagram app, users can upload, edit, and tag photos and videos. The company remained independent up until it was acquired by Meta for $1.0 billion in 2012. While Meta bought Instagram as the photo-sharing company was garnering significant attention from venture capital firms and other investors. Some estimates indicate that Instagram generates more advertising revenue than its parent company.

When it acquired Instagram, Meta opted to build and grow the Instagram app independently from Meta's main Facebook platform; Instagram remains a separate platform to this day. The price that Meta paid for Instagram, which at that time was generating no revenue, reflects Meta's willingness to pay a premium for young companies.

Type of Business: Mobile messenger service
Acquisition Cost: $19.0 billion
Acquisition Date: February 19, 2014

WhatsApp is a messenger and calling service available to users throughout the world. The platform was launched in 2009 as a low-cost alternative to standard text messaging services. Throughout much of its history, WhatsApp has allowed users to send messages and make calls directly to other users for no cost, regardless of location. Users can also send photos, videos, and documents over the platform. Meta bought WhatsApp at a time when the smaller company boasted more than 400 million active monthly users, making it a fast-growing potential rival to the Facebook network platform.

When Meta purchased WhatsApp, it was an independent company that had recently been valued at $1.5 billion. Although it is unclear exactly how much revenue WhatsApp generates, some estimates are that WhatsApp revenue will be as high as $5 billion by 2020.

Oculus VR

Type of Business: Virtual reality technology company
Acquisition Cost: $2.0 billion
Acquisition Date: March 25, 2014

Just weeks after announcing its acquisition of WhatsApp, Meta followed up by buying virtual reality hardware and software company Oculus VR. This company was founded in 2012 and is best known for its Oculus Rift product, a virtual reality headset that was designed for video gaming. Since Facebook's purchase of Oculus VR in 2014, the subsidiary has made multiple acquisitions of its own. Perhaps the most prominent was the 2015 purchase of Surreal Vision, a company specializing in 3D scene mapping reconstruction.

At the time that Meta acquired Oculus VR, the company had only produced a development prototype of what would become its popular headset product. Meta's purchase of Oculus VR gave it an instant presence in the virtual reality market at a time when developers were showing growing interest in VR.

Onavo

Type of Business: Mobile web analytics
Acquisition Cost: $100–200 million (estimated)
Acquisition Date: October 2013

Founded in 2010, Israeli company Onavo performs web analytics on other mobile apps to determine customer usage. Meta acquired Onavo in October 2013 for an undisclosed amount that some analysts estimated to be between $100 million and $200 million. At the time of the acquisition, Onavo was an independent company. Although Onavo is not one of Meta's largest acquisitions, Onavo's technology may have allowed Meta to make crucial early determinations about other companies and apps to acquire. Onavo has occasionally been classified as spyware, forcing Meta to pull Onavo from both the iOS and Android app stores in the face of criticism.

Beluga

Type of Business: Messaging service
Acquisition Cost: Undisclosed
Acquisition Date: March 2, 2011

Messaging app service Beluga, founded in 2010, was acquired by Meta a year later. Meta bought Beluga in the midst of the startup's fundraising process for an undisclosed sum. In buying Beluga, Facebook acquired the technology that eventually became the social media company's highly successful Messenger platform. In the process, Meta again expanded its offerings and eliminated a potential rival.

Facebook Diversity & Inclusiveness Transparency

As part of our effort to improve the awareness of the importance of diversity in companies, we have highlighted the transparency of Meta's commitment to diversity, inclusiveness, and social responsibility. The below chart illustrates how Meta reports the diversity of its management and workforce. This shows if Meta discloses data about the diversity of its board of directors, C-Suite, general management, and employees overall, across a variety of markers. We have indicated that transparency with a ✔.

Meta Diversity & Inclusiveness Reporting
	Race	Gender	Ability	Veteran Status	Sexual Orientation
Board of Directors
C-Suite
General Management	✔ (U.S. Only)	✔
Employees	✔ (U.S. Only)	✔

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Meta Newsroom. "Introducing Meta: A Social Technology Company."
Facebook. "Facebook Reports Fourth Quarter and Full Year 2020 Results."
Facebook, Inc. "What are the Facebook Products?"
Reuters. "FTC demands data on small buys by Google, Amazon, Apple, Facebook, Microsoft,"
Facebook, Inc. "Facebook to Acquire Instagram,"
TechCrunch. "Right Before Acquisition, Instagram Closed $50M At A $500M Valuation From Sequoia, Thrive, Greylock And Benchmark,"
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When Did Facebook Buy Instagram & How Much Did It Pay?

By Kyle Encina

Published Dec 11, 2020

Facebook is once again facing criticism over its Instagram acquisition, so here's a closer look at when the deal took place and how much it cost.

Facebook's acquisition of Instagram recently hit the headlines, in spite of the deal taking place almost a decade ago. The Federal Trade Commission accused the social media giant of illegal monopolization as it looks to reverse the high-profile acquisition, a deal that the FTC voted in favor of back when it was first announced. In light of these recent events, here's a quick look at when Facebook acquired Instagram, and how much the company paid for the photo-sharing app.

Even though the Facebook-Instagram merger is now under the spotlight, this is not the first time this year that the company has faced scrutiny for its Instagram purchase. Facebook CEO Mark Zuckerburg encountered backlash over the same issue months ago, due to a series of emails that were unearthed suggesting that the merger was completed with the intent of consolidating the competition before it became a potential threat.

Related: Facebook, Twitter & Google Fight COVID-19 Vaccine Misinformation

Facebook announced and finalized the deal back in 2012. The original April 2012 announcement confirmed the acquisition cost $1 billion in a combination of cash and company shares, and included a lengthy public announcement from the company's CEO. Zuckerberg expressed that the intent was to keep “building and growing Instagram independently” instead of just integrating the service and features into Facebook. Zuckerberg went on to say that the acquisition was “an important milestone” for the company and that Facebook had no intention of “doing many more of these, if any at all. ”

While the Facebook CEO's public statement from eight years ago gave the impression the company's expansion days were over, what happened afterwards didn't exactly marry with that idea. Facebook went on to acquire a number of other businesses over the years. One of the more notably additions was the widely-utilized messaging app WhatsApp and this was quickly followed up with the purchase of Oculus VR. Even more recently, the company invested in and acquired Giphy, the animated graphic database.

Whether or not Facebook continues its expansion still remains to be seen, but that doesn't change the fact that it has certainly accumulated quite a number of companies after initially claiming little intention of doing so. Likewise, despite Zuckerberg's claims of building Instagram separately from Facebook, and even though they are still separate apps and services today, there have been signals that the two have gotten closer to becoming one since then. The most recent example of this was when Facebook started testing a feature that seemingly blurs the lines between both platforms, by providing the option to view Instagram Stories in the Facebook app.

More: Facebook Vanish Mode: Using Instagram & Messenger's Disappearing Messages

Source: Facebook

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Why Facebook bought Instagram: “Zuckerberg was just scared”

April 10, 2012

Technology

Mikhail Levin Author

photo Fotobank / Getty Images

World experts on Facebook's largest acquisition in history: why the social network decided to spend $1 billion to acquire a mobile photo app

Facebook bought the popular Instagram mobile photo app for a fantastic $1 billion. Now founded a year and a half ago Instagram has about 30 million users , but the app is free and does not currently have a proven business model. Why this social network deal? What fate awaits the service itself? Here's what famous Internet entrepreneurs and experts think about it.

Finished reading here

"Facebook was scared of Instagram," says MySpace founder Tom Andersen. Facebook is not going to learn anything from Instagram. Zuckerberg went for the deal as Instagram's skyrocketing user base made him worry. Even if Instagram was only a nascent threat, it is still a threat. If your company is worth $100 billion, and neutralizing a potential competitor would only cost a billion, why not take that step?

David Kirkpatrick, author of The Facebook Effect, the social network's unofficial chronicle, thinks buying Instagram makes perfect sense, as photo sharing is one of the most important parts of Facebook's DNA. “The takeover of Instagram is a logical step for Facebook for a number of reasons, and above all because photos are one of the key types of content for the social network. Every day, Facebook users upload 250 million photos, for many of them this is the main form of activity on the site. Zuckerberg could not allow any other service to become the main platform for sharing pictures, ”Kirkpatrick emphasizes.

“Every time you see such a fast-growing social platform, it's a good reason to get a little nervous. Of course, it would have made more sense for Facebook to acquire Twitter when it was at a similar stage of development. However, if you believe that Instagram could be the next Twitter, the purchase is the right move,” said Paul Buckheit, partner at the Y Combinator incubator and founder of FriendsFeed, bought by Facebook a couple of years ago.

Some saw in the deal Facebook's fear of the possibility of Instagram being taken over by competitors. “The application would be of great value not only to Facebook, but, say, to Twitter. I'm also sure that Google was quite interested in buying. So to some extent, Zuckerberg is not only attacking, but also defending: Instagram is a very valuable asset for anyone who would like to compete with Facebook,” says Lou Kerner, founder of the Social Internet Fund.

MG Siegler, popular tech blogger and VC funder CrunchFund, is optimistic: "People look at the deal and think, 'what the f*ck?' I think Facebook is brilliant. This is one of the few big companies where they understand how and when to buy. You don't buy at the peak, you buy on the way to it." He predicts that with the release of Instagram on the Android mobile operating system (until last week, the service was available exclusively for iPhone owners), the number of users of the application in the very near future will reach 50 million people.

After the announcement of the deal from Instagram, a protest exodus of some users began, fearing for the future of the service. For example, the message “RIP Instagram” (“Rest in Peace Instagram”) was hugely popular on Twitter. In Zuckerberg's original post about buying Instagram, the Facebook founder promises to keep the brand, independence and impartiality of the service. “Instagram users' ability to share photos with friends from a wide variety of social networks is an essential part of it. We plan to keep this feature, as well as the option not to share photos with other services at all. The user's social graphs on Instagram and Facebook will also not depend on each other," writes Zuckerberg.

Tom Andersen is sure that the founder of Facebook is not being disingenuous: “Facebook mostly revolves around friends and therefore is terribly afraid of services like Twitter or Instagram, which profess a more open and public model and where the messages of any user are available to everyone else. Therefore, Zuckerberg wants to own the main “private” social network (Facebook) and the main “public” one (now it is Twitter, but you can’t buy it, so the only way out is Instagram). In his opinion, in the near future Instagram may cease to be exclusively a mobile application and settle on personal computers.

The Russian Internet, due to the difference in time zones, has not really had time to respond to the news yet. “I had just fallen asleep, when suddenly two messages with the same text came - from News360 and from The new york times: they write that Facebook bought Instagram for a billion dollars. [...] What kind of comments can there be? I'm in the a**. I turn off my phone and go to sleep. Tomorrow will be a new day. Perhaps in the morning it will turn out that it was a belated April Fool's joke, ”SUP media director Anton Nosik wrote in his LiveJournal. However, Spout has not yet disclosed the reasons for his skepticism.

“The trend is simple: we used to say that text content is shrinking. It all started with long Livejournal posts, ended with 140 characters on Twitter [...] (Now) progress, grinding everything in its path, from text to pictures. With the advent of Timeline on Facebook, this became more pronounced: photos began to receive more likes, the whole emphasis on viewing photos. So why did Zuckerberg pay this amount? The answer, it seems to me, is banal: he was simply frightened. Because just a little bit more and Instagram is the next Twitter, and some Pinterest is the next Facebook,” says Anton Merkurov, an expert at the Institute for State Ideologies.

Mikhail Levin

Author

#Facebook #Instagram

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How Facebook bought Instagram and what it led to • Excerpts from books on the website of the BOMBORA publishing house

Book excerpts
May 8, 2021

Why did Zuckerberg decide to buy a popular startup for $1 billion and did Instagram employees get rich from this deal.

More interesting things below

In 2005, Kevin Systrom left Silicon Valley to travel to Florence. There he planned to study photography, so he bought the best camera he could find before the trip.

But the Florentine teacher selected her on the very first day of class. He handed the student a primitive plastic camera that took square blurry pictures. “You must learn to love imperfection,” he told Systrom. The idea for Instagram was largely born that summer. A few years later, Systrom will become the author of one of the most popular and expensive applications on the planet.

Why Instagram resisted “growth at all costs”, how Facebook managed to buy an independent app, why Instagram lured stars and why the founders of the app were forced to leave, journalist Sarah Fryer tells in the book “No Filter. Instagram Story. We share an excerpt from the book about that very fateful deal.

Facebook decides to buy

When Facebook founder Mark Zuckerberg heard that Instagram was raising funds for a $500 million valuation, he realized that this tiny, noisy competitor pumped up with new money could quickly become an even bigger threat. The only solution was to buy it.

Zuckerberg thought he knew how to talk to Systrom, like founder to founder. Systrom did not want to lead the Facebook product. He aimed to keep the company alive and continue to shape the future of Instagram without the risks that come with being independent.

Facebook networks have already helped Instagram grow - and if Instagram became a part of Facebook, they would have incredible resources to grow faster. This argument seemed to please Systrom. But serious negotiations were required.

Meeting of the two founders

On Thursday night at Zuckerberg's new home in Palo Alto's leafy Crescent Park neighborhood, Systrom began by asking for $2 billion. Zuckerberg tried to reduce this figure and later decided to include other participants in the process. He invited Facebook COO Sheryl Sandberg and CFO David Ebersman to a serious talk. They said they trusted his instincts, but first they would need to warn the director of transactions, Amin Zufonun, who could arrange everything.

There was disagreement about the ratio of money and shares in the transaction. Cash seemed like a safer option compared to risky potential future gains.

Zuckerberg tried to convince Systrom that the price of the deal in the future would be much higher. If Facebook stays the same, 1% of the company will only be worth $1 billion. But Facebook planned to grow, thereby bringing the value of the offered shares closer to Systrom's original figure and even exceeding it.

The Zuckerberg Hunter and the Surprise Bite

While the deal participants were talking, Bist, Mark's big dog, wandered around looking people in the eye or rolling over on his back as if he wanted to be part of the deal.

- Are you guys hungry? Zuckerberg asked. It was already three in the afternoon, and they only drank beer. — I'll fire up the barbecue.

Mark pulled out of the freezer a large piece of either venison or wild boar—something with lots of bones. “I don’t know what kind of meat it is, but I think I once hunted it,” he said. Last year, Zuckerberg's goal was to only eat meat from animals that he killed himself.

Zufonun stood next to Zuckerberg while he worked on the meat. Smoke was coming out of the grill. Suddenly, the shepherd looked at the guest and growled. Then Bist threw himself on Amin's leg. "Crap!" exclaimed the director of transactions.

- Did he hurt you? Zuckerberg inquired. If yes, then we will have to report it. And they can take it.

Luckily, Bist did no harm and Zufonun did not bleed to death, but later in meetings he jokingly told the story as if on the eve of the historic event, Zuckerberg was more concerned about the dog than the person in charge of the deals.

The place of the new app in the company

Usually, when Facebook acquired a company, they found ways to absorb the technology, rebrand and fill in the gaps with their own developments. If Instagram was going to be a standalone product of Facebook, then it was breaking the normal acquisition process, and it wasn't clear how things would work.

How can we integrate something like this? asked Facebook head of engineering Michael Schroepfer.

- Shrep, we're buying magic. We pay for magic. We don't pay a billion dollars for thirteen people. The worst thing we can do is force Facebook on them prematurely.

Zuckerberg emailed the Facebook board to let them know what was going on. It was then that they first heard about a major and almost completed deal. Since Zuckerberg had a majority vote in the company, the role of the board of directors was only to put stamps on his decisions.

The fate of the Instagram team

After closing the deal, the Instagram team decided to take a breath and went to Vegas. Upon their return from the weekend, the first news they received was that Facebook would not be able to help them with resources or infrastructure until the deal was actually approved by regulators. According to Facebook's lawyers, this could take many months.

The US and European governments have been investigating whether buying Instagram would give Facebook monopoly power. Until then, Instagram can't be at Facebook's headquarters and can't begin active recruitment, so they'll have to work just as hard.

The second news was personal. Most of the employees didn't get rich. A couple of weeks after the deal, a Facebook representative came to the Instagram office in South Park to offer everyone new contracts with the founders of the application, Systrom and Krieger: new salaries, new stock options and cash bonuses if they stay at Facebook for more than a year. One by one, people entered the conference room, and some came out with gray faces.

Only three employees have been on Instagram long enough to be able to buy their quarter of Instagram shares and convert them into Facebook shares at a lower price. Everyone else didn’t extract any wealth from Instagram shares.

How much the founders of

earned Systrom and Krieger, on the contrary, received life-changing sums. Krieger owned 10% and Systrom 40%, so at the original deal price they made a net profit of $100 million and $400 million, respectively.

Both began to explore how to spend the new fortune, and did so in a way that the tight-knit team noticed. Krieger planned charitable work, studied how and where to donate money, and was also interested in collecting contemporary art.

Systrom started looking for a house and invested in Blue Bott le Coff ee. Sometimes Systrom's purchases in online stores were delivered to the office. Employees noticed his new car, new Rolex watch, and new skis. Money finally gave him the opportunity to have what he wanted, in the best possible way - for him, the Instagram feed now seems to have become a reality.

For more facts and insider information about the mechanics of Instagram and its impact on our lives, read Sarah Fryer's book No Filter. Instagram Story.

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