Summary: Between Facebook and Twitter, Instagram reportedly preferred being acquired by the former. When it came to increasing its valuation though, Instagram used Twitter to make Facebook pay more. Maybe April 2012 should be referred to as the month of Instagram rumors. Two weeks ago, a rumor suggested that Facebook beat Twitter to Instagram. Instagram co-founder and CEO Kevin Systrom first got an offer and a term sheet from Twitter, then doubled his companys valuation by striking a deal with Facebook co-founder and CEO Mark Zuckerberg. This new rumor is different than the last one in at least one significant way: the previous one said Zuckerberg called Systrom. Systrom orchestrated what was referred to as a three-way chess match between Instagram, Twitter, and Facebook by multiple people knowledgeable with the deal cited by VentureBeat. Twitter supposedly made an offer in the hundreds of millions of dollars range, but Instagram did not sign the term sheet. Systrom then supposedly went to Zuckerberg, who bid just to block the Twitter deal. Systrom preferred Facebook anyway (product and vision alignment was better); he apparently just used Twitter to increase his companys valuation.
and that's how business gets done.