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Facebook has purchased the iPhone app Instagram for $1 billion.  The app photo-sharing service is available on Android phones. Instagram allows people to apply filters to photos they shoot to appear like they were taken in the 70’s or by polaroid cameras.

Facebook made history on Monday with the biggest purchase app in history. Facebook snapped up the photo service Instagram in cash and stocks.

It was a “big payday” for Instagram’s 27 year old founder and CEO Kevin Systrom. In speculation Systrom will receive $400 million, a dozen of employees will receive $100 million and the rest will go to venture capital firms.

“This is an important milestone for Facebook, because it’s the first time we’ve ever acquired a porduct and company with so many users,” Mark Zuckerberg announced the news on his blogpost Monday.

Facebook will run Instagram as an independent company. Facebook’s stock is expected to start trading in May.

Instagram has 14 million users, founded 2 years ago but hasn’t turned a profit yet. “Facebook will never make that $1 billion back, but it’s still smart,” says Patrick Moorhead, principal analyst at Moor Insights & Strategy, who deemed the move “defensive.”

The move is “defensive” because “Instagram was the only thing challenging (Facebook’s) dominance in photo sharing,” Moorhead says.

Facebook announced last month improvements to photo capability, such as high resolution and full screen photos.