Facebook’s taken the proactive measure of acquiring Instagram, the mobile photo-sharing network regularly referred to as Facebook’s biggest competition.  What’s most notable about the deal is the price tag – $1 billion for the startup that, just last week, was going after a $50 million funding round with a valuation of $500 million.  Instagram’s certainly cashed in, making for what could be the exit strategy of the century, taking an early acquisition offer that Facebook itself refused to do.

The question now is, what’s Facebook planning to do with Instagram?  The company says Instagram will remain a separate project, but we all know that story could change.  Photo-sharing is something near and dear to Facebook, and this could be a great in-move for Facebook’s long term mobile strategy.  As we saw with Facebook’s earlier acquisitions like Gowalla, Facebook’s clearly interested in developing mobile tools around social-local networks, and for Instagram, it’s all about the data.

It’s all about the data

Instagram, which only recently expanded its iPhone app to the Android platform, has its own limitations in terms of social capabilities, access (not even an iPad app), but showed the promise of scale, along with a nice search function for hashtags and a burgeoning ecosystem.  Combining the best of Facebook and Twitter (within the confines of a mobile photo-sharing app), Instagram virtualized the photo experience with artistic touches around filters, some of which are premium [update: Instagram has shifted away from premium filters].  This adds a great deal of value to the photos themselves, generating metadata based on tags, comments, location and sharing behavior.

This is an area Facebook’s been working on for some time, with auto-tagging options for its in-network images, and it’s likely only a matter of time before these additional features get layered into Instagram’s mobile app.  We’re certainly curious what this buy means for Instagram’s Service Level Agreement, privacy and end user experience, and it’s something worth monitoring.

Timeline integration is a no-brainer here–Facebook’s latest profile revamp has been a goldmine for app incorporation on a large scale, reformatting user interaction and activity beyond Facebook’s actual website.  Tying Instagram’s mobile reach even tighter to Facebook’s Timeline is something we can expect regardless of Facebook’s true intentions with the Instagram buy.

Where’s this leave Google, Twitter?

While we can speculate on Facebook-Instagram integration all we want, we know it’s a good idea.  Facebook beat its competitors to the punch with this acquisition, building up its search and recommendations capabilities to say the least.  Perhaps Google could take a cue from this and find a way to better incorporate its own photo features through Google+.  From a multimedia standpoint, Google has all the pieces necessary to build its own Facebook-Instagram combo killer, injecting search at an even higher level.

But that still leaves Twitter, the “other” primary platform in Instagram’s success.  Like Facebook, Twitter’s made its own proactive acquisitions for purported rivals, squashing or incorporating the technology into their own platform.  But will Twitter need an Instagram to call its own?  Possibly.  Facebook, Google+ and Twitter have all sought to include more features around photo-sharing, largely based on mobile context like location and social tags like user identification and searchable hashtags.  But Twitter is still dwarfed by Facebook as a photo repository, and has minimal functions around photo-specific actions within its site or mobile app.

The race is on for the mobile-photo showdown, as image, location and social data drive interactions across the social space.  Only time will tell if Facebook made a smart move in spending $1 billion on a mobile app, and what its ulterior motives are moving forward.