Facebook took 4 years to reach 100 million users. Instagram debuted in October 2010 and had 1 million users by 2 months and 10 million by September 2011. With approximately half a billion Android users around the globe, there is much more upside ahead for Instagram which is why it was worth all of that money to Facebook.
While Facebook says that Instagram will remain a stand-alone application, don't be surprised to see some changes made. Facebook needs to recoup its investment. Although $1 billion seems like a lot of money (and it is), not taking duplicate names into consideration, Facebook has spent $25 for each Instagram subscriber. And that number is only going to drop as more people install Instagram. When you look at it that way, it would appear that Facebook has purchased a long list of smartphone savvy names for what will eventually be a very reasonable cost.