I don't think Facebook believes they'll make more money buying Instagram (I'd be will to bet that on a P&L basis the NYT will make more/lose less than Instagram over the next 5 years). I think that they believe their enterprise value will decrease less and this is a defensive acquisition. They probably saw that $100B valuation vulnerable to dropping to $75B (completely made up numbers, just for the purpose of example) if user growth or photo sharing (or some other blech social metric) dropped off in the lock-up period. Spending $1B to preserve $25B of 'value' is an easy call.

Let other people say what they will about the fact that such a easy to reproduce and young startup caused them to drop $1B defensively...