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I don't think Facebook would spend $1B for image editing. Image editing has well known and documented solutions.

I think they bought a younger demographic. When I was young I didn't want to hang out with my parents and their friends.

its not about new users. it is about engaging their existing users on a new platform - mobile. Pretty sure instagram mobile crushes facebook mobile in engagement

one, instagram has brilliant team which also include creative people and not only tech. two, very high yet active user base. three, which is purely on business value - the cumulative time spent in the mobile app of 30 million active instagram users, when you add up, will give more revenue in facebook ad in the following years. i would say, facebook played safe here in trying to regain the usage time.

In other words: get ready for ads in your Instagram feed? ;-)