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Facebook Moves to Secure Online Pics Leadership

The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK ( TheStreet) -- Facebook has acquired Instagram, an extremely popular mobile photo-sharing platform for $1 billion in cash and equity. Instagram was a 15-month-old startup which had attracted more than 30 million users on Apple's (AAPL) iOS in less than 15 months, and more than a million users on Google's (GOOG) Android in a day following the launch of its app on the platform. While it was still quite small compared to Facebook or Yahoo's (YHOO) Flickr, the top image sharing platforms on the Web, it was growing incredibly fast, and continued to see high user-engagement levels despite the presence of scores of similar services.

This quick acquisition at an eye-popping valuation begs the question -- why would Facebook acquire Instagram?

Check out our complete analysis of Facebook.

Facebook already has a much larger user base -- more than 845 million users. Most of Instagram's user base is probably already using Facebook, so the move wasn't only to acquire new users.

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Though Facebook had a much bigger user base for platform to share photos, Instagram had the potential to become much bigger, given the really addictive interface and integration across all major social networks like Facebook, Twitter and others. While Instagram gathered a loyal user base of more than 30 million users on iOS, it was poised to explode in the next couple of weeks following its launch on Android, the largest smartphone platform in the world.

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.

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