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Why do app size drop when moving to SD card

I notice when I move an app to the SD card the size drops. For example, Instagram is about 16.5MB when stored on the internal memory. When it's moved to the SD card it drops dramatically to 4MB, so what happened to the other 12.5MB??
 
And what the applications menu shows as the size of the app is the amount of internal space it uses, not the total size of the app. So the reason it shrinks is that the rest is now on sd.
 
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