SOCIAL NETWORK Facebook has bought Instagram – a profitless, two-year-old photo-sharing application – for $1 billion.

Instagram is a mobile sensation that counts Twitter co-founder Jack Dorsey among its backers and has been downloaded by more than 30 million people. The $1 billion price – in cash and stock – is the highest for a profitless start-up since Google bought YouTube for $1.65 billion in 2006.

When the Silicon Valley start-up released a version for Android phone users this month, it was downloaded one million times in its first 12 hours.

The app allows people to share photos taken with their mobiles with friends on its own site and on Facebook, Twitter or via text. Photographers can use a variety of filters to alter the look of their pictures, giving their images a vintage, old-world feel. Users can then promote pictures and add comments.

Mark Zuckerberg broke the news on Facebook. He said: “This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all.

“But providing the best photo-sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.”

Instagram was founded in October 2010 by Kevin Systrom and Mike Krieger.

Asked about Instagram’s history on the QA site Quora recently, Mr Systrom said he had “never expected the overwhelming response” the app had received. “We went from literally a handful of users to the #1 free photography app in a matter of hours.”

Mr Systrom said Instagram took just eight weeks to build and launch but was the result of more than a year of work. At the South by Southwest conference in Austin, Texas, this year, the pair announced that the company’s iPhone app had nearly doubled its number of registered users since December, going from 15 million to 27 million.

This is the first time Facebook, which is in the process of going public in a deal that could value the company at more than $100 billion, has made a big acquisition.

Mr Zuckerberg said the Instagram team would continue to operate as a separate company.

“We will try to learn from Instagram’s experience to build similar features into our other products,” Mr Zuckerberg said. “At the same time, we will try to help Instagram continue to grow by using Facebook’s strong engineering team and infrastructure.”

– (Guardian service)