Facebook buys Instagram: inflating the new tech bubble? Unlike earlier Facebook acquisitions such as Gowalla, Instagram has a significant user base in its own right, of around 30 million registered smartphone owners who have been promised the favourite photo app will retain its own identitiy. But with no particularly unique technology, the cash and stock Mark Zuckerberg will lay down for the firm is eye-popping. Introduced to the Apple iOS App Store on 6 October 2010. Initially funded by $500,000 from venture capital firms Baseline Ventures and Andreessen Horowitz. Later investments, including from Twitter creator Jack Dorsey, valued the firm at $25m, then $500m (last week). Staff: 13 More than one billion photos uploaded More than five million more uploaded every day Revenue: none By way of illustration, today $1bn could also buy The New York Times Company (Q4 revenue $643m, market cap $942m). The website of its flagship title has an estimated online readership of more than 44 million per month, some of whom pay to access it, unlike Instagram's users. A more directly comparable online media property, the popular photo sharing network Flickr, was bought by Yahoo! for $35m in 2005, though it had a fraction of Instagram's user base at the time. The apparent mismatch between Instagram's business and its valuation is inviting unflattering comparisons with earlier big money social network acquisitions: Bebo was acquired by AOL for $850m in 2008. It sold it to a private equity firm in 2010 for only $10m. MySpace was acquired for $580m by News Corp in 2005. It was sold on to an online advertising firm last year for $35m. Friends Reunited was sold to ITV in 2005 for £120m ($191m). Last year, DC Thompson, which bought the website in 2009, told its shareholders it was worth only £5.2m. Those old enough to remember the original dotcom bubble, which began deflating in 2000 (when Mark Zuckerberg turned 16), are even recalling some of the British technology and web industry's most spectacular miscalculations: Once valued at more than £2.5bn, in 2002 the directory service Scoot.com sold up to BT for £5m. At the height of the dotcom bubble, the dial-up ISP Freeserve was valued at more than £8bn, more than the retailer Dixons, which owned 80 per cent of it. Even those who have benefited from ambitions technology valuations, such as Bebo's Michael Birch and Ernst Malmsten of the defunct clothing website Boo.com, have sounded the alarm over recent valuations, calling them "a bit silly" and "crazy" respectively. But Facebook was itself criticised for its low revenues for many years and clearly values Instagram's brand and smartphone appeal more than its bottom line.