Facebook has taken control of the popular social photo sharing application Instagram for $1 billion, as reported by Mark Zuckerberg in his own Facebook wall. The acquisition will be Facebook’s biggest acquisition to date.

The purchase is expected to become reality later this quarter, and arrives in the middle of a legal battle between Facebook and Yahoo for the use of patents relating to the labeling of pictures. The acquisition also occurs at a time when Facebook is preparing to go public in an IPO offering that will raise as much as $10 billion.

“I am excited to share the news that we have agreed to acquire Instagram and his talented team will join Facebook,” said Mark Zuckerberg on his social network account.

Instagram is not only a famous photo application, which made headlines last week for its leap to the Android operating system, but also a successful mobile social network that’s already garnered no less than 50 million members.

“For years, we have focused on creating the best experience to share photos with friends and family,” said Facebook founder Mark Zuckerberg. “Now, we’ll be able to work even more closely with the Instagram team to also offer the best experiences for sharing beautiful mobile photos with people based on your interests.”

Facebook + Instagram Integration

In just a little over two years, Instagram became the default photo app for smartphones. The app hits more than one million downloads on Android’s platform in the first 12 hours after its Google Play launch. It already has 30 million+ registered users on the iOS platform alone.

Instagram may seem like a competing photo-sharing app for the mobile sector, but it’s value also lies in its extensive ecosystem, which was just getting going.  The company recently announced an API for developers to integrate Instagram’s photo-sharing features for third party integration, creating a wave of integrated tools for the popular app to extend its features.  Instagram’s spawned tools like Webstagram, Statigram, Parallel-ogram, My Gram etc, not only providing power-rich features for Instagram’s core product, but also opened up the app potential to slowly become the hub of our mobile photo experiences.

Instagram: the true Facebook competitor

Facebook is essentially about photos in its own right, and for the first time Facebook had a competitor that could destroy its future prospects – mobile photo sharing.

Facebook says it will respect the concept and functions of Instagram,  maintaining its “strengths and features.”  Zuckerberg further clarifies that  Facebook will not focus on integrating all the features of Instagram on its social networking site, but already anxious Instagram users, already upset over the Android release, have deleted their accounts at the news of Facebook’s acquisition deal.

Instagram users will retain the option of sharing their content on social networks other than Facebook. They will also keep the ability to have followers and follow people separately from their Facebook friends.

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

Here is where Facebook might be interested

Facebook will benefit from the access to Instagram infrastructure and engineers. We expect to see an onslaught of filtered photos on Facebook profiles. Photo filters that are not yet available on Facebook like Stalker, Winklevoss, Bender, Reader, Meme and Poke will increase the photo sharing exposure, which means even more users will be uploading  photos to their Timelines.

Instagram is only available on iPhone and Android right now. Facebook has a healthy relation with Microsoft, so there’s hope of an Instagram Windows Phone version in the near future, a goal Instragram already noted at the release of the Android version.

Most importantly it will provide Facebook a much needed lift where it failed – viral growth on mobile.  Facebook made it easy to share photos on desktop version but the company hasn’t been successful in mobile photo editing or dedicated photo apps.