Recently, Facebook bought Instagram for $1 billion. Instagram has a mere 13 employees. This begs the question: Why did Facebook buy Instagram? Facebook is a very popular social networking site with over 845 million users. On Facebook, one sees many advertisements, which means that Facebook's main source of revenue is from advertising. However, to generate revenue from these advertisements Facebook has to attract users. Upon attracting new users, Facebook makes money when users view and click on the advertisements. This means that the more users Facebook has, the more profit they can potentially earn. In an attempt to maximize the number of users, Facebook bought Instagram. When Facebook bought Instagram it attracted many people, especially considering that Istagram has 31 million users itself. The widespread news coverage of Facebook's buyout of Instagram probably attracted more users to Facebook simply through increased publicity. Even this post generated more publicity for the buyout. Facebook is currently in the progress of attracting new customers and until this story is "old news" we can't know the increase in number of people.
Sources:
http://www.digitopoly.org/2012/02/07/how-many-customers-does-facebook-have/
http://en.wikipedia.org/wiki/Instagram
http://en.wikipedia.org/wiki/Facebook