MUMBAI: In its largest ever acquisition, Facebook has snapped up Instagram, a 2-year-old photo-sharing application developer, for a whoping $1 billion in cash and stock ahead of its public float.

By acquiring Instagram, Facebook may also have sought to absorb a potential rival or at least prevent it from falling into the hands of a major competitor like Twitter or Google Inc. The Instagram application, which allows users to add filters and effects to pictures taken on their iPhone and Android devices and to share those photos with their friends, has gained about 30 million users since it launched in January 2011.

The acquisition marks an exception in strategy for Facebook, which has traditionally bought small companies as a means of hiring coveted teams of engineers. Facebook generally discontinues the acquired company‘s products or builds similar versions that it integrates into its service.

Instagram has said that by the end of 2011, its users had uploaded some 400 million photos or about 60 pix per second. Instagram launched its Android app just last week, garnering more than one million downloads already.

Instagram is backed by a number of web industry bigwigs including Benchmark Capital and Andreessen Horowitz. Benchmark partner Matt Cohler led a $7 million funding round in Instagram in 2011 and serves on Instagram‘s board.

It is likely that Facebook will acquire Instagram‘s entire team.