You can't tag people on Facebook in a photo uploaded from Instagram, or at least I never found a way. Facebook's own photo app will be a first-class citizen in that regard.
I think the main advantage is that people already see photos as one of Facebook's killer features. It's different than when they launched Places and Offers; photos is the reason a lot of people register for Facebook in the first place.
Assuming Color et al. have no incredible innovation up their sleeves, any data set they would be gathering is most likely a subset of what Facebook already has on their graph.
In that case, Facebook is very well positioned to execute faster and better in that space.
