Facebook’s acquisition of Instagram could take some more time to fructify. US Antitrust Regulators has served a Notice to the social networking company to confirm that it will now conduct a lengthy investigation of the deal.
Facebook paid US$ 1 Billion to acquire popular photo-sharing company Instagram. However, US regulations mandate any deal above US$ 68.2 Million should face a ‘Competition Probe’ in order to weed out any wrong doings or infringing tactics. Though any such probe usually takes about 6 months to a year, Facebook was confident of completing this within the first half of 2012 itself. A very optimistic estimation which has been shattered by the Notice.
What does the Notice mean? The Notice states that the Federal Trade Commission (FTC) will now sift through a much larger pile of data than previously envisaged. This will be done to thoroughly verify that the deal does not break any Antitrust laws. When Instagram had concluded its latest round of funding its valuation was roughly US$ 500 Million. For Facebook to buy it at twice the amount for a two-year old startup is bound to raise doubts.
Though many had raised doubts about Facebook paying more than it should, Instagram is eventually going to be a very important part of Facebook’s mobile strategy. Facebook had been facing monetizing issues with its mobile ecosystem. With Instagram’s mobile-centric photo sharing tricks that appealed to people, Facebook would have been able to improve the financial dynamics the way it has done for the desktop version.
Facebook also faces a looming threat of US$ 200 Million in case the deal fails to materialize. Will Facebook be able to offer Instagram to its users within this year?