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Facebook Close to Buy Photo-sharing Software Company Instagram for $1 Billion

Facebook is ready to spend $1 billion to buy the photo-sharing company Instagram in the social network’s largest acquisition ever. Facebook is paying cash and stock for San Francisco-based Instagram and hiring its dozen or so employees.

The deal is expected to close by the end of June.

Facebook CEO Mark Zuckerberg announced the acquisition on his Facebook page:

“This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience.”

Zuckerberg also indicated that he plans to allow people to continue using their Instagram accounts to post photos to competing social networks and will allow users to choose whether or not the photos are posted to Facebook.

“Instagram lets people share photos they snap with their mobile devices. The app has filters that can make photos look as if they’ve been taken in the 1970s or on Polaroid cameras. Its users take photos of everything from their breakfast egg sandwiches to sunsets to the smiling faces of their girlfriends.”

Although Instagram has not monetized or developed revenue streams to date, their 30 million dedicated users uploaded over 400 million photos in 2011. The dedicated user base and incredible functionalities propelled it to the coveted status of the 2011 iPhone App of the Year.

Wedbush analyst Michael Pachter, who follows social media, is confident there will be more acquisitions in the near future:

“Facebook after this IPO is going to be in a position to be predatory. They can make sure no one steps in their way and buy anyone who gets in their way.” Buying Instagram, he added, not only eliminates a rival but gives Facebook the technology “that is gaining crazy traction.”

With the deal, Instagram will gain massive design and engineering resources by joining forces with Facebook, a big change after running as a famously lean company with just a handful of employees. Still, the deal seems to let Instagram stay somewhat independent and maintain some of its company culture. Instagram CEO Kevin Systrom writes in a blog post, “It’s important to be clear that Instagram is not going away.”

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