In April of this year, Facebook (NASDAQ:FB) acquired the photo sharing site, Instagram for $1 billion. What we did not originally know is that Twitter was reportedly bidding on Instagram for $525 million, according to an article in the New York Times.
March of this year, Twitter approached Instagram with the $525 million buyout offer. Instagram CEO Kevin Systrom was said to have made a verbal agreement on the offer, only to back out and decide to keep the company separate. Unfortunately for Twitter, Facebook made their $1 billion offer one month later and the rest is history.
After the deal between Facebook and Instagram was agreed upon, Systrom was questioned by the California Corporations Department to determine whether or not the deal was justified and other specific details. Under oath, Systrom said that Instagram had received no “formal offers” prior to the Facebook deal.
In a market that is dominated by rivalries, the landscape continues to evolve. Instagram and Twitter have had their past confrontations. Only recently, Instagram disabled Twitter cards causing users to experience issues with uploading pictures and connecting the two sites. It appears that Instagram is following in the parent company’s footsteps as far as rivalry is concerned.
In the months ahead, it will be interesting to see whether or not Twitter will pursue legal action against Instagram and Facebook. Obviously something is not right here.
Traditionally, Twitter would have received an opportunity to make a counteroffer since they were first to bid on the site. Twitter executives were obviously willing and ready to make a higher offer but were never given the chance. Twitter could end up filing for a review of the deal. While Systrom told authorities that he never received any formal offers, a counter story has been made known that says he made a verbal agreement. Unfortunately, it could be difficult for Twitter to prove their case unless they were able to get a voice recording of the conversation.
As for Facebook, things appear to be looking up. After a disastrous initial offering, the stock took a nose dive all the way to $17, where it finally bottomed. Currently, the stock is trading around $27 and appears to be gaining Wall Street support for the first time. Earnings have picked up for the social networking company as ad sales continue to provide the company with stable growth. However, the company’s good fortune could come under fire should Twitter decide to take legal action.
The bottom line here is there is some unknown details surrounding the Facebook-Instagram deal. Twitter says they got a verbal agreement from the CEO for $525 million but later denied the offer. Twitter could make a case of this and a case against Instagram’s action to pull Twitter cards. All parties involved have declined to comment at this time but it will certainly be interesting to see how the social networking landscape will be affected moving forward.
