Instagram's billion-dollar deal with Facebook has been the talk of the town since the news broke earlier this month, with pundits questioning its worth given its youth and lack of revenue. But it reportedly got a hefty leg up thanks to some careful manoeuvring on the part of cofounder and chief executive Kevin Systrom.
According to VentureBeat, Systrom first got an offer from Twitter, before playing it off against Facebook. Facebook ended up buying Instagram for US$1 billion – a sight more than Twitter's proposed number, which was in the hundreds of millions.
Twitter apparently felt Instagram’s service was nicely aligned with its business, but Instagram, which was closing a round of financing, went to Mark Zuckerberg for a better deal.
But ultimately, Instagram’s choice to go with Facebook was more to do with product and vision alignment than price, a source told VentureBeat.
The general consensus is that Facebook’s purchase of Instagram was intended to boost its position in mobile and photo-sharing, two of its weaknesses. However, VentureBeat says Zuckerberg was in fact terrified by the prospect of Instagram becoming a Twitter-owned service.
Jack Dorsey, Twitter cofounder and executive chairman, told the Wall Street Journal Facebook grew through photos, but a lot of people know the site for showing what happened earlier, not what’s happening right now. He believes Instagram can help change that.
“Instagram replicated a lot of ideas Twitter brought into the world–the real-time nature of it, the public nature of it, the timeline, the follow, the discovery aspect and even the constraint. We have 140 characters, Instagram has a square. I think Facebook recognised that and did what they had to do.”