There is a lot of speculation about Facebook’s $1bn acquisition of Instagram. Regardless of how much Instagram is actually “worth” (value is in the eye of the beholder), here is my perspective on how it might have gone:
Facebook realizes that in order to keep winning the social network game, they need to be much stronger in mobile than they currently are. Instagram today has one of the largests “mobile social networks”, a great team and clearly a very good understanding of how to grow and scale on mobile.
Realizing this, Facebook tried to acquire Instagram for, let’s say $300mln. Instagram respectfully declined, and went on to raise $50mln at a $500mln valuation. Zuck realized that they were at risk of losing their chance to win in mobile, and purchasing Instagram in 2 years would could cost them $4bn+ (look at Ebay/Skype). If Instagram is what’s needed for Facebook to successfully IPO and keep growing, then the wise thing to do was to purchase Instagram at the lowest possible price they would today accept: $1bn (so at least the investors got a nice return).
Not sure if this was the actual turn of events, but it sounds feasible.