Facebook Moves to Secure Online Pics Leadership
Instagram also released its API a few months ago, which enabled other apps and services to use the Instagram platform, positioning it as the ultimate, cross-platform photo sharing service. Given Instagram's tremendous growth on mobile, and Facebook's relatively low market share in the mobile photo sharing space compared to online photo sharing, acquiring Instagram was probably the best way for Facebook to become the dominant photo-sharing service across all mediums.
This would also explain the seemingly high valuation at which Facebook acquired Instagram. Instagram finished raising $50 million at a $500 million valuation just a day before Facebook acquired it. Facebook must have had to shell out twice as much just to get them to sell quickly -- within a day -- without getting other giants like Google or Apple involved in a bidding war, which could have ultimately led to an even higher valuation.