FACEBOOK’S $1bn acquisition of photo-sharing app Instagram may be delayed for up to a year, after a complex competition investigation has begun, according to a report.
The Financial Times has cited “two people familiar with the matter” to support the claim that the Amercian Federal Trade Commission has begun a competition probe – which could delay the deal from completing beyond the end of June.
Facebook executives wanted the major deal to be completed before then, according to its initial public offering documents.
The competition investigation (a routine procedure in the US for any deal worth more than $68.2m) will entail Facebook’s closest rivals (including Google and Twitter) providing information about the deal.
The postponement of the acquisition's completion could also set back the social network’s mobile ambitions.
Yesterday Facebook warned investors that the rapid growth of its mobile apps threatens its long-term financial prospects as users increasingly desert their desktops.
A week before its Wall Street flotation, Facebook said the number of users of its and apps for smartphones and tablets is growing quicker than the number of adverts it is serving up because it has not developed its mobile advertising strategy.
“We believe this increased usage of Facebook on mobile devices has contributed to the recent trend of our daily active users increasing more rapidly than the increase in the number of ads delivered,” Facebook said.
As more people use mobile devices to chat to friends and post pictures yet Facebook remains unable to make money from them, “our financial performance and ability to grow revenue would be negatively affected”, the dominant social network admitted.
Facebook made the disclosure in an update to its regulatory filings, ahead of its highly-anticipated IPO next week. The flotation is expected to raise as much as $13.6bn on a valuation of up to £96bn.
Competition analysts believe the Facebook-Instagram deal will ultimately be approved – but it could take up to 12 months to clear. Special attention will be given to the takeover because of the high price Facebook paid for the app, which has yet to generate any revenues.
“They’re going to want to take some months to investigate and understand the market and other players,” Mark Lemley, a professor at Stanford Law School, told The Financial Times. “And there may be more parties with an interest in submitting information.”