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Facebook announced Monday it would pay $1 billion in cash and stock for photo-sharing app maker Instagram.
The Instagram deal is Facebook's biggest ever in both price and reach. Instagram has more than 30 million active users - which it accumulated in just 18 months - the most of any startup that Facebook has bought.
"We don't plan on doing many more of these, if any at all," Facebook CEO Mark Zuckerberg wrote in a blog post Monday, speaking to the size and scope of the deal. "But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."
Instagram, the most popular way for iPhone users to take and share photos, was named iPhone app of the year in 2011. Its features allow picture takers to alter the size, color and style of photographs.
The Android Instagram app debuted last week to a frenzied audience, with millions downloading the app immediately.
This new integration will make Instagram much more popular with Facebook's 800 million subscribers. Posting photos on Facebook that were taken via Instagram is not currently user-friendly, only showing a small thumbnail and link when users share pictures.
This deal will be different than previous ones Facebook has entered, according to those involved. Instead of Facebook taking over the Instagram resources, it will allow the company to develop with limited interference.
"We're committed to building and growing Instagram independently," said Zuckerberg. "Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people."
AOL Patent Sale Shields Facebook from Attacks
Meanwhile, AOL announced today (Monday) it sold more than 800 patents and related applications to Microsoft Corp. (NASDAQ: MSFT) for $1 billion at an auction, and gave Microsoft a non-exclusive license to the patents it retains.
AOL's patent portfolio includes fundamental social-networking patents, highly coveted in the tech world.
This is good news for Facebook, which is a Microsoft partner and will likely avoid battle over the technologies.
Had a Facebook "enemy" - such as Yahoo! Inc. (NASDAQ: YHOO) - gotten hold of the property, the social media giant could have been hit with more lawsuits. Yahoo already has launched an all-out patent assault on Facebook.
"Besides the two deal partners and shareholders, Facebook is the number-one beneficiary," Florian Mueller, an independent intellectual property analyst and consultant, told CNNMoney. "An independent AOL or any other buyer would have picked Facebook as the first target, but Microsoft is a friend. Google once again missed out on a unique opportunity."
Lucky AOL investors saw the share price soar more than 40% in morning trading.
"This is a valuable portfolio that we have been following for years and analyzing in detail for several months," Brad Smith, Microsoft's general counsel and executive vice president for legal and corporate affairs, said in the release. "AOL ran a competitive auction and by participating, Microsoft was able to achieve our two primary goals: obtaining a durable license to the full AOL portfolio and ownership of certain patents that complement our existing portfolio."
AOL's patent deal with Microsoft was especially stunning to some investors since an advisory firm recently informed Bloomberg News it valued the patents at no more than $290 million.
But AOL CEO Tim Armstrong once called the patents as valuable as "beachfront property in East Hampton."
AOL didn't disclose the exact patents that were sold. The company did say it retained about 300 patents covering advertising, search, content generation, social networking and mapping technology.
AOL said it would share a "significant portion" of the sale revenue with shareholders. AOL expects the deal to close by year's end, at which point it'll announce to shareholders what it plans to do with the cash.
AOL shares traded almost 50% higher by 2:30 p.m. EDT to $27.01.
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