10 Reasons Why Facebook Bought Instagram

When The Social Network 2 is written, I hope the screenwriter won’t pass up the chance to have Mark Zuckerberg explain to Sean Parker that “a billion dollars isn’t cool. Spending a billion dollars is.”

Facebook’s announcement Monday that it is acquiring Instagram, a precious mobile app for sharing retro-ized photos has everyone asking, ‘Why would Facebook pay $1 billion for a company with no revenue?”

1. Because it could. It’s fairly unusual for a company to drop a cool billion heading into its IPO, but Facebook already has a ton of cash on hand (just under $4 billion according to its S-1 filing) thanks to private share sales to Goldman Sachs, says University of Notre Dame biz prof Tim Loughran. “Facebook, with huge cash on hand, is already acting like a big, publicly-traded tech company,” says Loughran. “Facebook didn’t need to go public first to get the cash to make the major acquisition.”

2. Because it didn’t want a competitor to snap it up first. “It appears that Facebook really wanted to purchase Instagram before another bidder (maybe Google) made the deal,” says Loughran.

To read the entire article visit: 10 Reasons Why Facebook Bought Instagram

/news_and_events/news_articles/article/11132/10-reasons-why-facebook-bought-instagram