Facebook is buying its main supplier of controversial facial recognition technology in a deal worth up to $60m (£38m).
The social networking company hopes the purchase of Face.com will bolster one of its most popular features - the sharing and handling of photos - but use of the firm's technology has spurred concerns about user privacy.
Facebook is to pay cash and stock for the Israeli start-up, with two sources close to to the deal claiming the price is set at $55-$60m.
Previous reports have suggested the deal would be done at between $80m to $100m.
Neither Facebook nor Face.com have disclosed terms of the deal, which is expected to be finalised in the coming weeks.
Facebook, which will acquire the technology and the employees of the 11-person company, said in a statement that the deal allows the company to bring a "long-time technology vendor in house".
Face.com, which has raised nearly $5m from investors, including Russian web search site Yandex, launched its first product in 2009.
The company makes standalone applications that consumers can use to help them identify photos of themselves and of their friends on Facebook, as well as providing the technology that Facebook has integrated into its service.
Facebook uses the technology to scan a user's newly-uploaded photos, compares faces in the snapshots with previous pictures and then tries to match faces and suggest name tags.
When a match is found, Facebook alerts the person uploading the photos and invites them to "tag", or identify, the person in the photo.
Responding to opposition from US and European privacy campaigners, Facebook last year made it easier for users to opt out of its controversial facial-recognition technology for photographs posted on the website, in an effort to address concerns that it had violated user privacy.
But Graham Cluley from internet security firm Sophos says there are still concerns over privacy.
He told Sky News Online: "Many people feel distinctly uncomfortable about a site like Facebook learning what they look like, and using that information without their permission.
"The acquisition of Face.com puts even more power in Facebook's hands to determine what you look like, and find your face in uploaded photographs.
"Most Facebook users still don't know how to set their privacy options safely, finding the whole system confusing.
"It's even harder though to keep control when Facebook changes the settings without your knowledge.
"The onus should not be on Facebook users having to 'opt-out' of facial recognition, but instead on users having to 'opt-in'.
"If it doesn't do that, Facebook is once again eroding the online privacy of its users by stealth."
The deal is the latest in a string of acquisitions by Facebook in recent months, including the $1bn deal for mobile photo-sharing service Instagram.
US antitrust regulators are undertaking an extended review of the Instagram deal, which Facebook expects to close by the end of the year.
Shares of Facebook are continuing to trade below May's stock market flotation price of $38.