Instagram is booming: the new $100 bn company

7 years ago - Published in Fundamental Analysis

Facebook-owned Instagram would be worth $100bn as a standalone company today, new research suggests, reported by Bloomberg. The company was bought by Facebook for $1bn in 2012, indicating that it has grown 100-fold in value in just six years.

According to data from Bloomberg Intelligence, the platform has emerged relatively unscathed from Facebook’s recent controversies involving fake news, Russian propaganda, data breaches and privacy. The platform is adding users faster than Facebook, and will probably surpass 2bn within the next five years.

While Facebook passed the 2bn user milestone already, Instagram’s audience also skews younger than Facebook, making it more attractive to advertisers, while continuing innovations like the recently-announced IGTV suggest that the platform still has plenty of room to innovate and grow.

Bloomberg Intelligence analyst Jitendra Waral predicts that Instagram could account for around 16 per cent of Facebook’s revenue over the next year, up from 10.6 per cent last year. Most of this will come from newsfeed ads, with IGTV unlikely to make much of an impact on revenues until Q4, and potentially not until 2019.

Its author also estimates that Instagram should reach 2 billion users—catching up to Facebook itself—in the next five years. Instagram recently announced it reached 1 billion monthly users.

Instagram, Waral writes, “should be able to double the traffic at a faster pace, as the adoption curve of the platform has outpaced core Facebook.”

The financial implications of the acquisition have been huge for Facebook, which has been able to easily replicate the News Feed ad model for the photo app. Its newest product, a broadcasting platform called Instagram TV, could boost the business as well, Waral adds.

Users are spending nearly as much time on Instagram as they are on Facebook. According to a recent report, that’s about 53 minutes per day for Android users. Market analysis firm eMarketer also recently estimated that Instagram now accounts for nearly 30% of Facebook’s net mobile ad revenue, with that share potentially growing to 40% by 2020.