Did Facebook spend $1B to keep Instagram from Twitter?

The microblogging service made an offer in the range of "hundreds of millions of dollars" for the photo-sharing app, which Instagram promptly took to Facebook, sources tell VentureBeat.

Was Facebook's acquisition of Instagram motivated by paranoia?

That is the theory behind a VentureBeat report that Mark Zuckerberg rushed the negotiation process for the photo-sharing app to keep it out of Twitter's hands. The report contends that Instagram CEO Kevin Systrom first received an offer and term sheet from Twitter and then leveraged that for a $1 billion payday earlier this month from the social-networking giant.

Systrom used a pending funding round with Sequoia and Greylock to pressure Twitter to make an offer, a source tells VentureBeat. However, Instagram reportedly did not sign the offer, said to be in the range of "hundreds of millions of dollars."

With the financing round still pending and the Twitter offer in his pocket, Systrom went to Zuckerberg to see about a better deal, according to the report. However, a higher selling price wasn't Systrom's primary motivation; he also felt Facebook offered better product and vision alignment than Twitter, a source familiar with the negotiations told VB.

But, VB reported, Zuckerberg wanted to keep the app, which was currently experiencing explosive growth in its user base, out of Twitter's stable, leading to the whirlwind three-day negotiations between Zuckerberg and Systrom. The pair of twentysomething CEOs reportedly closed the deal -- Facebook's largest to date -- without Zuckerberg consulting bankers or even his own board of directors.

Facebook declined to comment on the report, citing the SEC-mandated quiet period before its IPO, which is widely expected to occur in May or June. Twitter representatives also declined to comment.

Although Facebook bought Instagram, it doesn't appear that there are any plans to cut off Twitter users. Zuckerberg has said that "the fact that Instagram is connected to other services beyond Facebook is an important part of the experience."

 

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