Facebook and Instagram have been working together for weeks on an Open Graph integration for the mobile photo sharing app, Inside Facebook has discovered.

Facebook, which announced today that it acquired Instagram for $1 billion in cash and Facebook stock, has helped Instagram roll out a Timeline application to groups of users in stages without any friction on the user side.

Open Graph lets applications create “actions” that can be published automatically to Facebook. These apps compile user activity over time and share summaries of that activity on Timeline. For Instagram, that action is “took a photo.” We first saw evidence of an Instagram Open Graph app in mid-March. Late last week, we noticed a few more users who got access to the app, but even today it has not gone live for all Instagram users who have connected their accounts with Facebook. (See the difference in how Instagram posts to Facebook with and without Open Graph below.)

This type of rollout is possible because Facebook is automatically updating user permissions. Previously, users who authorized Instagram to connect with their Facebook account enabled the “post on my behalf” permission. This is the permission any app uses to post to a user’s Wall. With the addition of Open Graph apps that publish to boxes on user’s Timelines, there is a new “post on my behalf” permission seen circled below.

We discovered and confirmed with Facebook that it worked with Instagram directly to enable this Timeline permission without requiring users to re-authorize the application. In the case of Instagram, this makes sense since the setting does not change the controls users have or what the app can publish. It simply optimizes the format of posts and helps organize user’s photos on Timeline. Users still have a clear choice whether or not to share their photo on Facebook when they create an image in the Instagram mobile app. Presenting users with an auth dialog for a second time when the change does not affect user privacy in any way simply wouldn’t be good user experience.

Whether or not Facebook will allow other developers to do the same is unclear. A spokesperson told us on Friday, ”We’re currently working with a small set of partners to test extending the publish_stream permission to include the Open Graph publish_actions permission to enable apps to publish to Timeline.”

Facebook did not respond to requests for additional comment and clarification after the news about the Instagram acquisition was revealed.

Instagram users have long been able to post their photos to Facebook. Originally, these appeared as links with small thumbnails that took users off-Facebook. Earlier this year, Instagram incorporated the social network’s Photos API so that images would appear full-size and be collected in a Facebook album. Now with Open Graph, the app publishes photos in such a way that they are compiled in a box on users’ Timelines (see right). The app also publishes stories in the format: “[User] took a photo with Instagram.” This links to the photo and to the Instagram app, which are more likely to drive traffic and new users to Instagram than the previous way of publishing did.

Now that Facebook has acquired Instagram, the mobile photo sharing app is likely to have access to additional APIs and beta features so that it can optimize its Open Graph app.

With Open Graph integration

Without Open Graph integration

A report from marketing services company Experian says Pinterest is the third most popular social network in the U.S. after Facebook and Twitter.

In past years when a social platform started to get traction as Pinterest has, Facebook responded by launching features inspired by its would-be competitors. There was the switch to a real-time feed in response to Twitter and the addition of check-ins when Foursquare was hot. But with Pinterest, things might be different.

Pinterest’s status as an Open Graph partner potentially prevents Facebook from feeling a need to copy the app since it is essentially part of the platform already. The social network might also be clearer about its own direction at this stage, learning lessons from past knee-jerk reactions that ultimately didn’t take off on the site. Finally, Pinterest’s core functionality is one that already exists on Facebook: sharing links and images. We might see the social network take some design cues from the pinboard site, but it seems unlikely that Facebook would make any major overhauls or new products in response to Pinterest.

Open Graph as protection?

As an Open Graph partner, Pinterest’s site and mobile app integrate Facebook in a way that publishes activity to Timeline, Ticker and News Feed. The pinboard site is growing at the rate it is — 17.8 million unique U.S. visitors in February spending an average of 89 minutes per month on site — in part because of Facebook. Pinterest activity is featured prominently in News Feed and a number of celebrities, including Katie Couric and Vanessa Hudgens, share their pins with Facebook subscribers. Pinterest gets traffic and new users; Facebook gets data that it can use to improve its algorithms and ad targeting. For example, Ads API partners can target users by what they’ve pinned or pinners and boards they follow. This option isn’t available to self-serve advertisers yet, but is likely part of the future of Facebook’s ad platform.

When networks like Twitter and Foursquare started to become popular, they were seen as more of potential a threat to Facebook because they were collecting data about connections between people and interests that Facebook couldn’t access. Now Foursquare, along with Tumblr, Path, Instagram and other alternative social networks, have integrated Open Graph and essentially become a part of Facebook. (We’ve wondered whether Twitter would ever do the same.)

Lessons learned?

Most of the projects Facebook built as a reaction to another growing service did not last very long. In March 2009, the social network changed its algorithm-sorted News Feed to a real-time stream à la Twitter. By October that year, it added a “top stories” view to allow users to switch between real-time and a more curated feed. In 2010, Facebook CEO Mark Zuckerberg admitted to us that he felt he “paid too much attention” to Twitter.

Then there was the rise of location-based services with Foursquare and Gowalla attracting a lot of press. Facebook announced “Places” in August 2010, giving users the ability to check into places from their mobile phones. From the start, Facebook took a platform approach to location, partnering with other check-in services for the launch, but eventually the company realized the check-in mechanism was only part of the equation. It decided to phase out Places in favor of location tagging for any photo, status update, event or Open Graph action. The company also recently acquired location-based service Gowalla.

That same summer in 2010, Facebook debuted Questions, a Quora-like application to ask and answer questions publicly. The feature never made it out of beta. Instead, the project pivoted and Facebook released Questions as more of a polling mechanism in 2011. From what we can tell, Questions hasn’t ever taken off among users, though many page owners use the feature to engage fans. Facebook hasn’t improved the product much since launch. In fact, it took nearly a year for Questions to ever appear in the mobile feed, and users still can’t add new questions from mobile devices.

Facebook was also temporarily distracted by Groupon and Instagram. The social network’s pre-paid deals service was discontinued after about five months. A rumored photo sharing app that appeared to support filters — based on leaked images in June 2011 — was never released.

[Update 4/9/12 - Facebook has acquired Instagram for $1 billion. The company says the mobile photo sharing app will continue under the Instagram name.]

The social network did have success with its group messaging strategy. In early 2011, mobile apps like Beluga, GroupMe and Fast Society were taking off. Facebook bought Beluga and had the team convert the app into the standalone Facebook Messenger app. The app has been one of the Top 100 free iPhone apps since it launched in August 2011, and remains popular on Android as well.

What might Facebook do?

There’s clearly something to the Pinterest phenomenon, and Facebook seems to have its eyes on the pinboard site. Zuckerberg created an account a few months ago and he even Liked a site called Friendsheet that makes users’ Facebook News Feeds appear like Pinterest boards.

Facebook might not feel the need to recreate Pinterest on its own site, but the social network could take inspiration for smaller features through design or the way it simplifies sharing. Facebook, like Pinterest, has long offered plug-ins to make it easy to share links on the site. But unlike Facebook’s share button, Pinterest’s “pin it” button focuses on image thumbnails. Pinterest users can see all their thumbnail options at once, whereas Facebook users have to cycle through images one by one (see images below for comparison). We might see Facebook change this and we might also see the social network increase the size of link thumbnails in News Feed.

We probably won’t see Facebook buy Pinterest. The product does not incorporate any unique technology the social network needs and the company is already valued incredibly high. Pinterest was most recently valued at $200 million, but some investors have suggested it could be worth $1 billion. Even if Facebook was interested in the company, it would be unlikely to sell at this point. Pinterest can continue to grow and develop a business model, all while functioning on top of Facebook’s mutually beneficial Open Graph.

Facebook today shared stats that show how Open Graph integration has increased traffic, sign-ups and activity among video applications like Vevo, Viddy, Izlesene and Dailymotion.

These apps mostly live off-Facebook, but the addition of automatic publishing to Ticker, Timeline and News Feed has provided new opportunities for users to discover them. The social network continues to push the idea that Open Graph is not about bringing the entire web onto Facebook, but integrating Facebook into other sites and mobile devices and letting more companies reap the benefits.

Music video platform Vevo had early success with its Timeline app, but growth has accelerated significantly since Vevo switched to Facebook-only login in March. Here are some key stats from Facebook:

• 200 percent increase in daily registrations since the change to Facebook-only registration
• 600 percent increase in published actions on Facebook from February to March
• 130 percent increase in referrals from Facebook to VEVO from February to March
• 60 percent of Facebook referral traffic comes from Open Graph stories

According to our AppData tracking service, Vevo had 170,000 monthly active users on Jan. 1. Now the app has 750,000 MAU. Although Vevo did not share a breakdown of where activity was occurring, it’s worth noting that the company added a Facebook canvas experience last month for users to search for and watch videos directly from the social network.

Viddy is a mobile application best explained as “Instagram for videos.” Users can shoot 15-second videos with their iPhone, add visual effects and share the clips on Facebook. Since integrating with timeline in February, 1.5 million people joined Viddy, and the app has gone from 60,000 MAU to more than 920,000. Celebrities like Snoop Dogg, who use Viddy’s Timeline app along with the Facebook subscribe feature, have helped popularize the app. According to Facebook, Viddy has seen:

• 2x increase in average daily sign-ups since integrating Open Graph
• 9 million interactions with Viddy content on Facebook

Viddy shared the following additional statistics with us:

• 90 percent of new users join the Viddy app through Facebook (up from 25% prior to Timeline integration)
• 45 percent of all uploaded videos are now shared via Facebook since the integration

Turkish video site Izlesene makes frequent appearances in our AppData charts as one of the fastest growing applications. Since launching its Open Graph integration in September 2011, MAU has grown from 250,000 to more than 6.5 million. Izlesene has also experienced a 3x increase in the number of videos people view per day. According to Facebook, Izlesene ran A/B tests to find the right design for the site and copy for the auth dialog that would lead more people to add the application. For example, it added the Facebook Facepile plug-in and more context about permissions it requests.

Dailymotion is a video sharing site that added Open Graph functionality in January. The app had less than 680,000 MAU when it launched Timeline integration at F8. It peaked in mid-March with 8.8 million MAU, but has since dropped down to 5.4 million MAU. Daily active users are on the rise again this week. Representatives from Dailymotion didn’t tell us exactly what contributed to the fluctuations, but said there were some tests and promotions last month that could have had an effect.

For now, the app only shares stories about what users watch, not videos they add or other actions they take on the site. Even with the limited range of actions, more than 2 million Dailymotion stories are published to the social network on an average day, Facebook says. Dailymotion also says Facebook-connected users tend to engage more with content on the site than non-connected users, but it did not provide numbers for this.

Facebook did not include Hulu in its roundup. The app, which is available from the Facebook canvas and Hulu.com, uses Open Graph to publish the TV shows and video clips users watch. Hulu hasn’t seen the same momentum as some other Timeline apps, but this could be related to external factors, like how many shows it makes exclusive for Hulu Plus subscribers or changes in show air dates made to accommodate professional sports seasons and tournaments. Hulu also doesn’t offer some of the most buzzed about shows that are currently in season, like “Mad Men” or “Game of Thrones,” which limits its potential.

There are a few changes Hulu could make to maximize engagement with its app. For example, it could give users the ability to tag friends they’re watching a show with or leave comments at different points during an episode, similar to what SoundCloud does with songs. Hulu should consider adding new actions besides “watch,” for example  ”rate” or “favorite.” The app could also benefit from better summaries of what users watch over time. Currently, the streaming TV service simply displays the total videos users watched in a given time period. Instead, Hulu could highlight a user’s most popular show and display how many episodes of each series a user watched or how many seasons a user completed.

The Guardian reached a new record of unique visitors and page impressions for Guardian.co.uk in February, and the news organization attributes 30 percent of referral traffic to Facebook. That’s up from 2 percent only six months ago.

The change is largely the result of a Facebook canvas application that lets users read Guardian stories and share them automatically via Ticker, Timeline and News Feed. This is yet another example of Open Graph driving significant traffic to third-party apps and websites. For a few days in February, Facebook even surpassed Google in referral percentage to the Guardian, though it hasn’t maintained the lead.

“I believe it is only a matter of time before it [Facebook] becomes the main driver of traffic to many core Guardian products,” said Tanya Cordrey, director of digital development for the Guardian, at the Guardian Changing Media Summit on Wednesday.

Cordrey also discussed statistics and trends related to the company’s social news app. She said more than 8 million people have added the Facebook app in five months, and about 40,000 new users sign up each day. More than 4 million people used the ad-supported app in the last four weeks and many of them read several stories per day, she added. According to AppData, the canvas app has been getting between 200,000 and 250,000 daily active users.

Of these users, “only a small percentage” elect to hide or remove stories from their Timeline, Cordrey explained. We previously identified the Guardian’s privacy controls as some of the best among social reader applications. Because most users share all the stories they read within the app, and Facebook highlights social reader activity in aggregate News Feed stories, a new audience is discovering the Guardian.

Cordrey pointed out that largest group of users for the Guardian Facebook app are between 18 and 24 years old, a demographic that is hard for news sites to reach. The app’s users are also global. According to AppData, 50 percent of users are from the U.K., but the rest are from a range of countries. Cordrey said Facebook is also unique in that the peak time for news consumption appears to be the afternoon, not around morning, lunch and dinner, which is typical for radio, TV and the web.

Six years since Twitter founders sent the first tweet, we wonder how the microblogging network might build on Facebook’s Open Graph.

As Facebook encroaches on Twitter’s territory with the subscribe feature and interest lists, Twitter should consider ways to use Facebook’s own platform to protect itself. Early examples from Pinterest and Foursquare show how would-be competitors can benefit by embracing the social network’s tools. Likewise, a Twitter Open Graph app could improve user experience and drive traffic from Facebook back to the microblogging network.

Twitter already has an official Facebook integration that lets users post tweets to their profiles and friends’ News Feeds. It does not share retweets or @replies. An Open Graph app could leverage Ticker, allowing retweets and replies to appear in the lightweight feed and other tweets to show in News Feed. This would be similar to how Spotify publishes individual song listens to Ticker but puts stories about users listening to artists, albums and playlists in News Feed.

Twitter could also create Open Graph actions for following new users, favoriting tweets or creating public lists. Pushing these stories to Ticker would add opportunities for users on Facebook to discover content and conversations on Twitter. Pinterest, for example, says it saw 60 percent more Facebook users visiting its site after only a month of integrating Open Graph.

Open Graph integration would also give tweets a designated place on Facebook Timeline. Twittus is an unofficial app that does this (see right). As Facebook says, Timeline apps are meant to share different aspects of a user’s identity. For many users, Twitter is an important part of that identity.

Timeline provides other benefits, like summaries and navigation by date. Twitter, for example, could highlight how many tweets a person made or how many times they were retweeted in a given month. Facebook’s activity log would also make it easy for users to find past tweets — something that is incredibly tedious on Twitter, just as finding old Facebook posts used to be. (See example from Twittus below.)

Pinterest, Foursquare, Instagram, Spotify and others show that social networks can be built on top of Facebook, or at least drive traffic from Timeline apps. In these cases, Facebook has sidestepped direct competition. For example, the company has downplayed its check-in product in favor of attaching location information to all posts and providing the Places API for others to integrate. It will also eliminate its check-in deals product, leaving opportunity for Yelp and Foursquare. Facebook seems to have put its rumored mobile photos app on hold, giving Instagram room to grow. And despite predictions to the contrary last year, the company did not create its own music service but instead partnered with several others.

In recent months Facebook has been aggressive in pursuing asymmetrical relationships and interest-based connections, which is Twitter’s strength. Facebook is also courting celebrities, getting them set up with Timeline and using them to promote interest lists. The social network continues to give brands and organizations more features for customer service and promotion through pages. All of this hurts Twitter’s competitive advantage. Open Graph integration could ensure that Facebook users remain aware of Twitter and give them reasons to return.

Companies that create tab applications for artists’ Facebook pages are employing new tactics like Open Graph integration to counter the loss of landing tabs.

Most page applications have experienced significant drops in daily and monthly active users now that Facebook removed the default landing tab option for pages with Timeline. Apps like BandPage, Band Profile, Vevo for Artists and BandRx – which allow artists to put songs, tour information and commerce functions on their pages – used to make frequent appearances on our weekly top Facebook apps lists. Now they’re some of the week’s biggest losers, according to our AppData tracking service, losing between 80,000 and 670,000 daily active users since Timeline launched for pages on Feb. 29. These numbers are expected to keep falling as more pages switch to the new design, which is mandatory starting March 30.

Some of these apps have already taken steps to maintain relevance. BandPage announced Open Graph integration that shares stories about videos users mark as favorites and concerts they mark as “want to see.”

ReverbNation, maker of Band Profile, announced a suite of new apps for specific functions. The icons for these apps take advantage of the larger thumbnails now available for tab applications. Instead of having a single app with videos, tour dates, merchandise and more, musicians can add individual apps with easy-to-identify icons that users are more likely to click on and use. (See “Play,” “Join” and “Schedule” below.)

Vevo was one of the early adopters of Open Graph on its music video website. The company also offers a tab app for artists, but for now, actions within those apps don’t translate to Timeline. Vevo could do something similar to BandPage and allow users to share their activity like watching videos, commenting and adding favorites.

It’s unclear whether these measures can attract the same level of traffic band apps saw while serving as the default tab for a page, but these Open Graph integrations could increase engagement overall. Previously, users would land on an app the first time they visited an artist’s page, but they wouldn’t necessarily return because interaction with pages typically happens in the News Feed once users become fans. But with Open Graph integration, users might take more action in an app to fill in their Timelines. This activity is also sent to Ticker and News Feed, leading friends to discover the app content and ultimately the artists’ page. We’ll keep an eye on daily active users as a percentage of monthly active users to see if engagement does increase.

Companies that make band apps and other tab applications will have to diversify their offerings now that they can’t rely on default traffic. Developing mobile-compatible experiences — like Wildfire’s recent example — and helping clients take advantage of Timeline and Open Graph seem to be steps in the right direction.

Facebook today announced developers can build Open Graph applications that let users tag their friends and add locations to actions they take from the app.

For example, Hulu could enable users to indicate whether they are watching a show with a friend or Spotify could give users the option to share where they are when they listen to a song. This will create richer Timeline stories and build more complex connections between people, places and actions.

Facebook is also changing its API to let Open Graph apps publish large user-generated photos and video that will play directly in News Feed and Timeline. This addresses an issue we wrote about previously when developers had to make tradeoffs depending which API they used.

Together these changes give Open Graph applications the ability to publish stories equal to those made from Facebook’s own publisher — the box on the homepage and profiles from which users can create posts. The additions are likely to increase the reach of app stories. For example, mobile app Foodspotting could integrate the new features so users can take a photo of a dish they like, then tag the restaurant they’re at and friends they’re with. The photo will show full size on their Timeline and that of their friends. It will also appear in News Feed and on the Timeline map feature for everyone who approves the tag. Travel site Wipolo seems to be the first to have the friend-tagging feature live.

Also with the latest API update, developers can pull posts based on location. This means websites or apps can personalize a user’s experience if the user has a connection to a place. Previously, apps could determine whether a user or friends checked into a place, but not if they added location to an album or status update. This creates interesting possibilities for travel sites or businesses to display friends’ photos, posts and other Open Graph activity associated with a place.

[Update 3/7/12 5:20 p.m. PT - Hat tip to Josh Constine for pointing out this also means location-based services can import check-ins from other apps into their own, creating opportunities for discovery apps like Highlight and Glancee to incorporate more data about people nearby.]

Facebook seeks larger credit line, adds more banks for IPO - Reuters reports that Facebook is set to increase its $2.5 billion credit line ahead of the financial blow the company will suffer after employee stock awards vest. As such, it has hired Deutsche Bank, Credit Suisse Group and Citigroup to assist on its IPO, according to Bloomberg.

Facebook acquires Caffeinated Mind team – Facebook acquired the team behind Caffeinated Mind, according to a report from VentureBeat. The startup revolved around fast in-browser file transfers, as well as big data transfers.

Facebook partners with AT&T for hackathon – Facebook announced the AT&T Mobile Hackathon will be held May 4 in Palo Alto, Calif. Developers are invited to build mobile social apps for the chance to win a $20,000 prize.

Politicians switch to Timeline – President Barack Obama and at least 26 U.S. members of Congress switched their Facebook pages to the new Timeline format,  including key dates in their personal and political lives. Obama even included a photo of his birth certificate. AllFacebook.com has links to the pages here.

A number of sites and applications, including Pinterest, Foodspotting and Rockmelt, experienced significant increases in referral traffic and activity in the month since launching Timeline apps, according to a blog post by Facebook.

The latest metrics reveal that Open Graph integrations can help companies bring users to their own properties. In the past, developers and marketers often felt forced to build applications within Facebook tabs or canvas environments, sacrificing traffic to their existing sites. Facebook seems to be making a point of letting these stakeholders know that Open Graph is not about bringing the entire web onto Facebook, but integrating Facebook across the web and mobile and letting more companies reap the benefits.

According to the blog post, the number of Facebook users visiting virtual pinboard site Pinterest every day increased by more than 60 percent since they integrated with Timeline in January. Fashion photo app Pose has seen more than five times the amount of daily web sign-ups. Recipe site Foodily had a 4x increase in new users. Foodspotting, a food finding and sharing app, has seen three times the number of visits and activities shared.

Shopping site and mobile app Fab.com had a 50 percent increase in traffic from Facebook. Social web browser Rockmelt gained 20 percent more traffic and new users to the site since adding Open Graph functionality to its social reading app. Art discovery site Artfinder experienced a 60 percent increase in time spent on the site by new visitors from Facebook.

The social network says it has approved hundreds of Open Graph actions since opening up the platform last month. Lexus, Vogue Paris, Votizen, Identified, Boxee, MetaCafe and Shopkick are a few of the companies that most recently launched Timeline apps. See our overview of apps from Facebook’s launch partners here.

Facebook changed its documentation sometime last week to allow advertisers to target any Open Graph actions, we discovered.

Facebook now allows Ads API partners to target users by action, even if the advertiser is not associated with the Open Graph app that created the action. Previously, anyone could target Facebook-created actions read, listen and watch, but only the developer who created a custom Open Graph verb (e.g. drink, visit or run) could target users who took that action.

This latest change to the Open Graph action targeting permissions gives advertisers more options to pinpoint consumers based on their activity on Facebook and with integrated apps. It also means developers do not have exclusivity over the verbs they create. Limiting who can target which actions is not ideal for the platform as a whole, as it could result in land-grab situations where developers try to claim verbs to maintain control over advertising. However, by opening this type of targeting to all advertisers, developers have a clear way to poach users of competing apps.

Facebook’s “Action Specs Targeting” feature is not yet available from the self-serve ad tool. It is in beta for Ads API partners only, but the partners we’ve talked to say they haven’t done much to test the new functionality. They say the documentation is confusing and the number of actions and users taking those actions is not yet at a scale worth targeting. TBG Digital CEO Simon Mansell and AdParlor CEO and Cofounder Hussein Fazal publicly spoke to these issues during one of our Inside Social Apps panels last week.

Much of the future of this type of targeting depends on Ads API partners finding the best uses and requesting improvements. These companies have a very sophisticated understanding of targeting and optimization, and they work with high-spending clients. Their findings could help advance this aspect of Open Graph, but it seems these partners need need further support and incentive from Facebook to invest time and resources toward beta testing it. Making the documentation clearer and not changing it without notifying partners would be the first step.

New Action Spec Targeting Permissions (emphasis ours):

Anybody can target any action, either built-in actions or custom actions, for any app. The currently available built in actions are og:news.reads, og:music.listens and og:video.watches. For example anybody can target the og:music.listens actions created by any application.

Old Action Spec Targeting Permissions (emphasis ours):

Anybody can target built-in actions for any app. For example anybody can target the og:music.listen actions created by any application. Only app developers or advertisers can target custom actions for their app. For example, if you create a “drove” action for your app only you can target users or friends of users who performed this action.