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THAT'S TWO INSTAGRAMS

Instagram could be a $2 billion business next year

Kevin Systrom Instagram
Reuters/Lucas Jackson
Filtering for the Benjamins.
Published This article is more than 2 years old.

Facebook’s Instagram deal keeps looking better.

Acquired three years ago with fewer than 80 million users, Instagram now boasts more than 300 million active users globally. And it’s showing signs of becoming a real business.

Instagram could generate at least $2 billion in advertising revenue next year, RBC analyst Mark Mahaney estimates today in a research report about Facebook’s untapped opportunities. For context, $2 billion is almost 10% the amount Wall Street is estimating for all of Facebook’s 2016 revenue. It’s also double the $1 billion that Facebook famously offered for Instagram in 2012—which was a surprising number at the time.

“That may sound way too aggressive, and is highly contingent on how quickly Facebook decides to monetize Instagram,” Mahaney writes. “But we believe it accurately represents the potential contribution from Instagram Monetization (#nofilter).”

For Facebook, it represents another potential example of its highly successful execution in building a mobile advertising business. Facebook had effectively zero mobile advertising revenue at the beginning of 2012, and mobile now represents almost three-fourths of its ad sales.

Facebook has slowly and carefully introduced ads to Instagram, which has been the right move. Instagram’s users see their photo feeds as highly personal places, and unwanted ads—or jarring ad content—could easily spoil the experience.

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