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To win over Instagram, Facebook was forced to show its hand.

Facebook bought the photo-sharing service for $1 billion in early April, agreeing to pay roughly 30 percent in cash and 70 percent in stock, according to people briefed on the negotiations who did not want to be identified because the discussions were private. At that level, Facebook is pegging its own stock price at roughly $30 a share. Based on those numbers, the giant social network is valued at north of $75 billion.

But Facebook could actually be worth more.

During the negotiations with Instagram, the parties framed the deal around a logical assumption: Facebook could soon trade publicly at a much higher market value. As part of the talks, the companies discussed a potential value of about $104 billion for Facebook, these people said. Instagram's co-founder, Kevin Systrom, first broached the number, one of the people said.

At $104 billion, the value is roughly in line with where Facebook has traded at times on the secondary market, where shares of the privately held company have been selling for as high as $40.

While Facebook executives did not promote the higher value, the figure helped the Instagram team assess the deal. When Facebook goes public, Instagram's chief executive and investors could yield some extra profit on the shares of the social networking company. The reverse is true if Facebook does not fare well in its initial public offering.

Previous Internet deals may give Instagram's owners some cause for optimism. Amazon.com, for instance, bought Zappos in 2009, giving the shareholders of the shoe retailer 10 million shares, worth $807 million, plus some cash and additional restricted stock. Those 10 million shares are now worth $1.9 billion.

Although deal talks will not dictate Facebook's eventual price in the market, the acquisition could offer some insight on how the management team may be valuing the social network ahead of its highly anticipated offering. The company, which is currently in the process of making final changes to its prospectus, is expected to go public next month, these people said. The price of the offering will be determined by several factors, like market demand and the volatility in the equity markets.

Investor demand for IPOs has been mixed of late. Several Internet companies that went public in recent months are trading below their offering prices. Shares of the daily deals site Groupon, which were sold at $20 late last year, are currently selling for around $12. The online games company Zynga is roughly flat.

"I hope they didn't agree to this deal because of Facebook's valuation on the secondary markets," said Lise Buyer, a former Google executive and founder of the advisory firm Class V Group. "It's still unclear if there's a strong correlation between pricing on the secondary markets and the public market."

(STORY CAN END HERE. OPTIONAL MATERIAL FOLLOWS.)

With the Instagram deal, Mark Zuckerberg, 27, is also acknowledging the enormous value he has created in the eight years since starting the company.

Founded by Zuckerberg in his Harvard dormitory in 2004, Facebook has became the world's largest social network, with more than 845 million users and some 250 million photographs uploaded each day. While it was not the first social Internet company, it has quickly become the largest. At $104 billion, Facebook is worth more than LinkedIn, Twitter, Groupon and Zynga combined. In 2011, Facebook booked a profit of $1 billion on $3.7 billion in revenue.

The Instagram deal, which was described as an "important milestone" by Zuckerberg, underscores how important mobile has become to Facebook's ambitions.

With Instagram's star rising, Zuckerberg moved quickly on the deal. On April 5, Instagram closed an investment round that valued it at $500 million with a group of venture capital investors, including Sequoia Capital, Thrive Capital and Greylock Capital. The next day, Zuckerberg and Systrom, who is also Instagram's chief executive, talked about the outlines of a deal. After a hectic weekend of discussions, the deal was finished on Sunday, and Zuckerberg unveiled $1 billion transaction the next day his Facebook profile page.

"We don't plan on doing many more of these, if any at all," Zuckerberg said, referring to big acquisitions. "But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."