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Shutterfly, Inc. (NASDAQ: SFLY) is suddenly back in favor.  Facebook’s $1 billion gamble on Instagram for photo sharing did not flush out any new buyers to compete against Shutterfly for what is a $23.8 million deal for Kodak Gallery that will buy the Eastman Kodak photo sharing site out of the Eastman Kodak (NASDAQ: EKDKQ) bankruptcy.

If you go back and review the tape, Shutterfly went from under $27 to over $31 on the news last month, but then shares came right back down when Facebook’s much more expensive deal to acquire Instagram was announced. Now that the Shutterfly acquisition is closing without rivals the stock is up over 5% back to $30.55.

Where this whole thing gets interesting is that Kodak Gallery being bought for $23.8 million is taking on an established entity with 70 or 75 million users and it is believed to be profitable on its own.  Using the Shutterfly leverage will only help drive the greenbacks further.  Facebook’s $1 billion or so gamble on Instagram is for a two-year old company with only a few employees and with effectively no revenues.

With Shutterfly buying Kodak Gallery it will be better able to let its new and existing users share and store digital images.  It will also allow for easier photo books, scrapbooking, making cards, and personalized albums.

Facebook’s effort is the new-world deal, but the old-world deal sure seems a lot like the new-world deal for less than 3% of the total consideration that Facebook is offering to Instagram.

JON C. OGG