Why Facebook Bought Instagram

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Om Malik on today’s announcement that Facebook acquired Instagram:

Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects. Why? Because Facebook is essentially about photos, and Instagram had found and attacked Facebook’s achilles heel — mobile photo sharing.

I think Malik is right. Instagram provides a more elegant and pleasant mobile photo sharing experience - hands down. Facebook probably made a smart decision. I still come back to the $1 billion price tag, though. Anyone else think there is a rapidly expanding bubble that is about to burst?