The logic was that the fast growth of Instagram showed that it was a potential threat for Facebook, particularly in the mobile space where the app. was growing so quickly. I greeted the announcement with a mixture of bemusement and disbelief. The main reasons were summarized in the thesis I put forward in this article from last year that I wrote to explain why Google created Google+ and why they didn't really care about stealing users from Facebook.
I also, in a blog post from several years ago, before there was even a Google+ or Google wave... stated this:
"The proof of all this consolidation is clear in the numbers, users spend incredible amounts of time on the Facebook network...doing all these things they formerly did on different sites. Now, think...with such a huge investment made in having all ones interaction, content and community in one site...what on Earth can get them to switch en mass ?
nothing. Barring a catastrophe on Facebook's end...they will be the last of the social networks and if they avoid Google's response (their only real competition in that they are the only ones with a suite of products that can be woven together to provide a similar experience fast enough and have a user base broad enough to maybe slow their growth) " -- http://sent2null.blogspot.com/2009/07/facebooks-avalanche-picking-up-steam.html
Note, the mention of Google's "response" which came later that year (Wave was announced a month before but was not revealed until later in the year), waved failed as a email replacement meant to also provide social network like features. Two years later google+ was announced and revealed quickly and has grown very quickly but for the reasons mentioned in the earlier linked post, the growth has not come at the hands of stealing users from Facebook.
That would have been Instagrams problem trying to get people to do more than just share photos (flickr, picasa, photobox...a dozen other photosharing services!!) on the network....it would have never happened. Not only didn't they have the expertise (they were all of 13 people when bought) but they lacked all the features that create the social network tipping point of features that keep people stuck on a service.
So what would have happened was a year from now (more than enough time for Facebook to have simply used internal engineers to copy instagrams features without spending any where close to 5 million dollars let alone a billion) Instagram would get more funding...growth would slow, they'd have a lower valuation and would be swallowed by some other company for a song.
In light of this reality then Zuckerbergs move looks far more paranoid than prescient.