Back to top

Image: Bigstock

Just How Important Is Instagram To Facebook?

Read MoreHide Full Article

Back in 2012, the largest current social media network Facebook Inc. (FB - Free Report) bought a photo-sharing app in Instagram for $1 billion. The move was criticized by many who thought that Facebook paid too high of a price for the relatively new app, that at the time had just over 30 million users, did not make any money, nor stated it was even concerned with making money.

Now however, those people would be considered to be extremely wrong in thinking the acquisition was a bad move. Instagram announced yesterday it now reaches over 500 million users monthly, and over 300 million users on a daily basis. For comparison, that’s approximately double what other popular apps Twitter Inc. (TWTR - Free Report) and Snapchat see daily.

What’s even crazier than its growth rate is the fact that there are not any real signs that its growth will slow down anytime soon. In fact, it seems as though the opposite is true, as Instagram’s most recent 100 million users came faster than the previous 100 million.  

Instagram’s photo- and video-centered app has been widely successful mainly because of its relative ease of sharing. The medium is more accessible and has been more successful than Twitter’s text-heavy approach because it can cross barriers like language and create connections between people without formal social ties. Roughly 80% of Instagram’s users come from outside the U.S.

In regards to Instagram’s monetary value, research firm eMarketer expects Instagram’s global mobile ad revenue to hit $1.53 billion this year, and reach marks upward of $5 billion shortly in the year 2018. The app currently has more than 200,000 advertisers, and that number continues to increase as well.  Though Instagram’s ad revenue doesn’t make up much of Facebook’s revenue figures that are upwards of $26 billion now, as time goes on that is incredibly possible to change.

Bottom Line

Since the day it purchased Instagram, Facebook’s stock price has increased a monumental 248%, and though most of it has been due to the company’s own personal success, Instagram has been, and continues to be a major driver of growth. Revenues have increased for Instagram rapidly and they are projected to continue growing as more and more advertisers jump on to use the photo- and video-sharing app as a way to reach potential customers.

Facebook is projected to grow its sales numbers more than 45% this year, and one can bet that Instagram’s revenue growth has a large part in the overall growth of the company. Instagram is racing towards a user base of 1 billion, but only time will tell how fast they can reach that figure, and how big an effect it has on Facebook’s revenues, earnings, and most importantly for investors, its stock price.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 DaysClick to get this free report >>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

Facebook, Inc. (FB) - free report >>

Twitter, Inc. (TWTR) - free report >>