But for $1B, couldn't facebook just reimplement Instagram's interface and forcefeed it to facebook users? It's not like it needs the Instagram network, right?
Facebook could have remade Instagram, but there's no guarantee users would like it. Instead, now they have Instagram, its users, its growth, and its cachet; they've solved the photosharing hole in their app in one fell swoop.
Sometimes it's better to pay more for a sure thing. Plus, they got 12 new employees, so it's really only about $83MM each...
In cases like this, it makes more sense to purchase someone with momentum rather than try and build it yourself.