Report: Twitter offered to buy Instragram for $525M

Steven Loeb · December 17, 2012 · Short URL:

Offer came weeks before Facebook bought the company for $1 billion

We all know now that Facebook bought Instagram for $1 billion in April, causing a rift between Instagram and Twitter that resulted in the photo-sharing service removing its photos from the social network earlier this month.

The relationship between Twitter, Instagram and Facebook was close to being very different, though, at least according to an article from the New York Times on Sunday, which reported that Twitter had offered to purchase Instagram for $525 million in March.

In fact, there had even been a verbal agreement between Twitter and Instagram, before Instagram CEO Kevin Systrom told Twitter that his company had decided to “remain independent.” Three weeks later, he sold to Facebook.

This new information contradicts testimony given by Systrom in an August hearing of the California Corporations Department, which had been requested by Facebook to sped up the purchase process.

Systrom was asked if Instagram had received other offers, to which he is reported to have said, “No, we never received any offers,” though he did acknowledge that Instagram had “talked to other parties, but never received any formal offers from anybody else.”

The transaction finally closed in September at a $715 million valuation due to Facebook's stock drop.

If these reports are true, Systrom could be guilty of perjury, or of fraud for withholding information from investors.

Instragram, Facebook and Twitter

The deal between Instagram and Facebook has been mutually beneficial since the acquisition.

In a conference call following Facebook’s latest quarterly results in October, CEO Mark Zuckerberg mentioned Instagram as one of the company’s big successes in 2012.

Zuckerberg called Instagram "a platform success story,” saying that Facebook bought Instagram after it built a social integration that a lot of people really liked. And both companies saw opportunity to do even more together.

Instagram had 27 million registered users when Facebook bought it, a number that is now over 100 million. According to Zuckerberg, more mobile time is now spent on Instagram than on Twitter.

Facebook is on the verge of beginning to make money off of its investment, most likely through advertising.

According to a report from Sterne Agee analyst Arvind Bhatia last week, Instagram could see up to $700 million in just a few years.

In the report, Bhatia stated that Instagram has the potential to generate $500-$700 million in advertising revenue in the next three years. Within three years, he said, Instragram could be making $250 to $300 million annually.

Meanwhile, the relationship between Instagram and Twitter has gone completely downhill in the last few weeks.

On December 5, Twitter announced that Instagram had removed the ability for its photos to be embedded onto Twitter Cards, causing them to appear cropped. Then, just five days later, Instagram took its photos off of Twitter altogether.

As a result, Twitter released its own set of eight photo filters for its iOS and Android apps the same day. Twitter had previously announced that it would be debuting the filter in early November.

Facebook is now poised to make a ton of money off the most popular photo sharing service, while Twitter has to be content with trying to get its users to use what is essentially a rip-off of that service. Now that we are finding out that its possible that Twitter may have lost out on an opportunity to buy the company, the bad blood between the two companies makes a lot more sense.

Instagram declined to comment on the report, while Facebook and Twitter could not be reached for comment.

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