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Instagram Deal Gives Facebook IPO More Momentum

A month before the company is scheduled to go public, Facebook’s IPO just picked up some more steam.

Not that it needed it. The social media giant’s May IPO is one of the most anticipated initial public offerings in recent memory. Now, thanks to a new deal to buy Instagram, the Facebook IPO is garnering more publicity than ever.

Mark Zuckerberg’s company paid $1 billion to buy the photo-sharing app, it was announced on Monday. The Instagram buyout is the biggest purchase in Facebook’s history.

Instagram is only 18 months old, but it has been an overnight sensation. The application was created by Stanford graduates Kevin Systrom and Mike Krieger to allow iPhone users to share photos with each other on one central hub. The company is already valued at $500 million, with 30 million registered users.

Photo-sharing is one aspect of what has made Facebook such a hit. Perhaps that’s why the company paid Instagram double what it was worth – to remove a budding competitor in a key area of the social network’s business.

But the deal to buy Instagram does more than just remove a growing threat. It also improves Facebook’s portfolio and drums up some extra publicity in advance of the company’s IPO next month.

Facebook plans to sell $5 billion in stock during its initial public offering in an effort to achieve a $100 billion valuation. Such a lofty valuation would be more than four times the value of Google (Nasdaq: GOOG) went it went public to much fanfare in 2004 – an extremely ambitious IPO for a company that earned $1 billion in 2011.

Facebook will begin trading on the Nasdaq under the ticker symbol “FB”. The stock could go public as early as May 16.