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Page last updated at 09:21 GMT, Tuesday, 10 April 2012 10:21 UK

Instagram 'tremendous investment' for Facebook

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Facebook has announced it is to buy Instagram, the popular photo-sharing smartphone app, at a cost of $1bn.

Instagram allows smartphone users to take and share photos with one another and apply special effects to their pictures give them a vintage look.

In its two-year history it has grown fast, gathering 30 million users although it has little by way of revenues and it has only 13 employees.

Patrick Moorhead, analyst at Moor Insights & Strategy in Austin Texas, told the Today programme's Simon Jack that this was a "tremendous investment no matter way you look at it".

He said that Instagram has generated a huge following in the short time they have been out there.

He went on to say that Facebook was interested because "there was a potential that people would defect over to Instagram" and were looking at the deal "as risk mitigation to their IPO (initial public offering)".

"There are two holes they need to plug before going public," he said going on to explain that these are "a competitive threat from a small upstart like Instagram and the current lawsuit it has with Yahoo."

He said that he would hope Mark Zuckerberg would keep them as a separate units and keep investing in the property which is what Yahoo did not do when it bought Flickster.


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