Is Instagram worth $1bn to Facebook?

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Facebook has announced it is to buy Instagram, the company that makes a popular smartphone app that lets smartphone users add effects and filters to photos and then share them on the web.

Facebook is paying $1bn (£629m) in cash and stock for the takeover.

Instagram was only launched in October 2010, initially just for the iPhone before being offered as an Android app last week.

Facebook's chief executive Mark Zuckerberg has pledged to continue to develop Instagram as a separate brand, allowing it to post to rival networks.

Lee Simpson, Senior Equity Research Analyst from Jefferies International told the BBC "it has something of a smack of the dot com era to it".

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