Instagram: best tech buy in recent history?
Instagram sold to Facebook for a whopping $1B in 2012, and at the time, it dominated headlines for demanding such a high price tag. Fast forward just two short years, and Citi says the value is now $35 billion.
The company is in the middle of major changes, not only making the ballsy move to cut spam accounts (thereby reducing number of users and impacting most peoples’ follower counts), but adding new filters and features in the form of a “tray” that allows you to put your favorite filters front and center. These things sound small and simple, but for an app that has a single function and is designed to be simple, it’s huge.
Previously, Citi valued the brand at $19 billion, and has now increased that number by nearly double, as the app has performed better than even the most conservative projections regarding monetization and user growth. The value is calculated by analyzing future earnings for Instagram.
The year of revenue streams
Citi analyst Mark May says this coming year will be the year that revenue streams off Facebook take off, not just from their ad network, but from Instagram, WhatsApp, and other brands under the FB umbrella. Instagram alone is projected over time to contribute over $2B in “high-margin revenue at current user and engagement levels if fully monetized,” May noted.
The app has launched a rich advertising suite, offering analytics and targeting, and has even expanded outside of the U.S. and adding video ads for a pilot group of partners. Citi projects these ad products could generate up to $2.7B in revenue in 2015.
With a one billion dollar investment in an app which was mocked at the time as an excessive spend akin to behaviors not seen since before the dotcom bubble burst, Facebook could be seeing one of the biggest returns in recent history.