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Why Facebook paid $1bn for an app with no revenue

Sarah Frier's account of the rise of Instagram both outside and inside of Facebook in No Filter is a compelling read, says Lauren Almeida
Why Facebook paid $1bn for an app with no revenue
  • Sarah Frier chronicles Facebook’s takeover of Instagram 
  • And Zuckerberg’s ruthless growth strategy in the early 2010s

When 27-year-old Kevin Systrom created Instagram in 2011, the app was certainly not the first of its kind. There were plenty of other photography platforms on the market, some with similar editing features. So why did Facebook (US:FB) pay $1bn (£0.71bn) for the company just one year after its launch? Only a few weeks prior to the news, a private funding round had valued the business at $500m. Wall Street was perplexed.

It was the first time that any tech start-up had fetched such a valuation.  How could an app that generated no revenue, with ten times fewer users than Facebook, be worth such an astronomical figure?

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