On October 9 2006 Chad Hurley, 29, and Steven Chen, 27, sold a video-sharing website called YouTube to Google for $1.65bn. At the time there was a lot of guffawing about the profitless startup that allowed people to share videos of cats playing pianos and kids coming off skateboards. Whose laughing now? Google mainly.
But the history of mergers and acquisitions is not a happy one – not least in Silicon Valley. Yahoo's purchase of once super-hot photo site Flickr or the web-sharing service Delicious have both fallen flat.
NewsCorp's attempt to take on Facebook by buying MySpace famously failed. Even Google has a pile of startups it has brushed under the carpet. The big question now is whether Instagram is a cut-price YouTube or a $1bn Flickr.
YouTube got Google into video – then the hottest new area on the web.
Instagram gives Facebook the hottest app in mobile, now the cutting edge of tech. Thirty million people now own Instagram's app.
That's a lot of eyeballs for advertisers – if Facebook can make those people worth something without turning them off.
Alan Patrick, co-founder of technology consultancy Broadsight, is unconvinced: "It is stupid money, but I suspect the reason they paid it is that Facebook is extremely desperate to get a top scoring IPO story. Mobile is probably a big line in their future revenue growth pitch, pictures are a big part of that I'd bet, and their own mobile story was apparently failing, so that growth line was becoming less believable. 'Sort out something quick,' was the watchword I'd bet, and this was it."
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