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August 23, 2012

FTC Puts a Like on Facebook's Instagram Purchase

By Steve Anderson, Contributing TMCnet Writer

The Federal Trade Commission gave the official go-ahead for Facebook (News - Alert) to buy Instagram earlier today, joining the United Kingdom's regulators in giving the green light to the deal. It's not the last regulatory hurdle Facebook has to clear, but it is the last one that would do anything more than delay the deal's completion as opposed to stopping it completely. Thus the deal, one way or another, is quite done.



Facebook next week will face regulators from California's Department of Corporations in what's called a "fairness hearing", a hearing scheduled for August 29. Facebook will then be able to issue shares the next day under a state law that allows the issuance of shares without the SEC's (News - Alert) approval. Facebook had previously agreed to purchase Instagram for a combination of 23 million shares of stock and $300 million in cash in a deal that was, at the time, worth $1 billion. Recent blows to Facebook's stock price, meanwhile, have given Facebook a lovely discount in purchasing Instagram, dropping the total value of the deal down to $740 million by recent valuation.


Image courtesy of Shutter Stock

The process wasn't without its bumps along the way; Facebook and Instagram had announced their deal back in April, but had to run a gauntlet of regulatory approval first. The FTC (News - Alert) launched two separate requests for more information, but eventually they found themselves without objection and voted unanimously in favor of the deal.

Some believe that the FTC's decision should have gone farther in considering the full implications of the deal; some reports say that, while Instagram wasn't going after advertising very hard, that was less a permanent decision and more a temporary one. With the full power of Facebook's massive sales team--who has been fighting tooth and nail for more advertising following recent losses on that score, Instagram's draw for advertisers could be significant indeed. If such a position were operating when Facebook bought Instagram, this might have changed the FTC's final stance.

Still, the combination of an app that handles photos--Instagram--and an app that displays them--Facebook--is a clearly potent combination that should bode well for Facebook, and even for its users. It will be interesting to see just what kind of effect Instagram's operations have on Facebook in the long term, especially given the trouble that Facebook has been fighting lately.

Want to learn more about the latest in communications and technology? Then be sure to attend ITEXPO West 2012, taking place Oct. 2-5, in Austin, TX.  Stay in touch with everything happening at ITEXPO (News - Alert). Follow us on Twitter.




Edited by Brooke Neuman
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