Instagram Now Valued at $35 Bln

Instagram’s monetary worth jumped by 84%, to $35 bln, leaving Twitter behind, as the photo-sharing service saw a 50% increase in users during the last nine months.

MOSCOW, December 20 (Sputnik) — The Facebook-owned photo-sharing online service, Instagram, is valued at $35 bln by Citigroup, 84% more than previous estimates, as its commercial potential has been bolstered by an accelerated growth in users, advertisement earnings and overall investment appeal.

Instagram has outpaced Twitter in number of active users last week, with a total number of users exceeding 300 mln, making it one of the most dynamically growing online services. Based on its popularity, suggesting a higher selling potential, Mark May, an analyst with Citigroup, revised the previous estimate of Instagram’s total worth from $19 bln to the current figure of $35 bln, putting it in the same league as American Airlines (worth $36.4 bln) and Kraft Foods Group ($37.4 bln), as reported by Bloomberg.

Instagram has thus turned out to be an extremely lucrative investment for Facebook founder Mark Zuckerberg, who purchased the service back in April 2012 for what now seems a hilarious sum of $1 bln.

Citigroup believes that, albeit Instagram’s current contribution to Facebook’s total revenues is insignificant, the service has a huge potential for commercialization by extracting money off its users and data assets, as well as capitalizing on high user activity by putting more advertisements on the website at a higher fare.

“While Instagram is still early in monetizing its audience and data assets and its financial contribution to FB is minimal today, we believe that it is quickly gaining monetization traction,” May noted, as quoted by Bloomberg. The most important factors in Instagram’s commercial potential are “faster growth in its audience as well as continued monetization gains by social media properties,” he added.

In case Instagram’s current commercial potential is fully exploited the service would bring in as much as "$2 billion in high-margin revenue at current user and engagement levels,’ May wrote, according to Business Insider.

Investors should buy Facebook shares now, May suggested, reviewing their target price from $86 to $91.

Commercial ads first appeared on Instagram in the US in late 2013. The service quickly attracted high-profile advertisers like Adidas, Burberry, Levi’s and Paypal, among others. Ad targeting was implemented around that time, boosting efficiency in ad campaigning by exploiting the users’ Facebook data. In foreign nations like Canada, Australia and the UK, ads on Instagram appeared in 2014.

“Not only is Instagram’s audience now larger than Twitter, but its users are about 1.8 times more engaged, and user growth has been greater,” May wrote. “Instagram is at the early stages of rolling out advertising, but we believe brands have and will find it an effective channel.”

The growing popularity of the photo-sharing service had triggered the emergence of numerous spam accounts. Instagram has recently boosted its advertising efficiency by erasing millions of spam accounts during the so-called ‘Instagram Rapture’. As indicated by recent developments, Facebook might be preparing for greater commercialization of its services in 2015.