[stars]Hot off the presses: Facebook acquires Instagram.

Clearly, Facebook is working on global domination. Its strategy is simple: Buy one competitor at a time. The social network’s latest rival on the mobile scene was, until recently, Instagram – a photo-sharing community co-founded by Mike Krieger and Kevin Systrom. Their mission when they created the mobile platform was “To change and improve the way the world communicates and shares.”

In essence, the Instagram app allows users to manipulate and share pictures taken with their mobile devices. Users can follow one another, share and comment on pictures, and upload their shots to social networks such as Facebook and Twitter. Krieger and Systrom designed the app to be simple and easy to use, with a clean, user-friendly interface. In just 18 short months, the app went from fledgling mobile startup to powerhouse of the app world.

Facebook’s 1B Instagram Acquisition

Instagram skyrocketed from zero users to 30 million and growing in just two years’ time. Last week alone, the company raised more than $50 million. When the deal with Facebook went down, the company was valued at $500 million total. Since Instagram would have been a killer addition for Google, Apple, Twitter, and others fighting in the tech battle, it has been wildly speculated that Facebook found itself right smack in the middle of a bidding war. After all, Facebook paid roughly two times the company’s current worth to buy it.

But Wait – How Does Instagram Make Money?

This is the billion-dollar question now that the backroom deals are done. Though the app has 30 million users and counting, Instagram doesn’t currently make money – it’s funded by venture capitalists. Even more confounding is the fact that Facebook had this to say about its own expansion into (and subsequent domination of) the app world:

“Although the substantial majority of our mobile users also access and engage with Facebook on personal computers where we display advertising, our users could decide to increasingly access our products primarily through mobile devices. We do not currently directly generate any meaningful revenue from the use of Facebook mobile products, and our ability to do so successfully is unproven.”

Facebook is crackerjack at figuring out how to make money online, but on its mobile app? Not so much. Luckily, the social networking powerhouse has some breathing room to figure it out, because all the other bigwigs – Google, Yahoo, Twitter, and co. – can’t seem to get a handle on how to milk the mobile world, either.

This is more than a little troubling to Facebook’s current investors, and rightly so. The world is shifting to mobile technology en masse, and if Facebook acquires Instagram but can’t harness the power of its user base, then it will have some major issues down the road. There is a silver lining, however. The acquisition may end up being an ace-in-the-hole for Facebook because it didn’t purchase for the users – Facebook bought Instagram based on the data they provide. Facebook acquires Instagram and gets two times the personal information to mine in order to market to users – that is, when Instagram and Facebook finally figures out how to market on mobile.

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