Barring some unforeseen scandal (you never know, these days), Facebook's grabbing Instagram for $1 billion will go down as one of the biggest steals in tech history.
Since the deal closed in 2012, Instagram’s value has soared to heights no sane investor could have imagined. Indeed, Bloomberg Intelligence analyst Jitendra Waral just estimated the Facebook unit is now worth over $100 billion! That's not a bad return in less than six years.
Although puny compared to Facebook's flagship platform, Instagram’s financial success is thanks to its sizable community, which recently surpassed 1 billion monthly active users.
That community will likely help Instagram take in more than $10 billion in revenue over the next 12 months, Waral believes.
What’s the secret to Instagram’s success?
Well, while it has added a few features since 2012, the platform is still incredibly simple. Also, it was originally designed for mobile, a big plus, since desktop browsing has become an afterthought for many consumers.
The same could be said for Twitter, yet the two platforms couldn’t be more different. Regardless of their demographics, most newcomers catch on to Instagram’s purpose and potential almost instantly, while I’m still struggling to make sense of Twitter.
What's more, thanks to its focus on pretty pictures -- with text added on as an afterthought -- Instagram has remained the least politicized social platform on the market, while it's the least likely to attract trolls, bullies and other bad actors. Unlike his tweets, it's no wonder that Donald Trump’s Instagram posts rarely make headlines.
Particularly in today’s combustible cultural climate, that's a huge advantage. Yet, it's one that Instagram risks losing as it wades deeper into video.
As YouTube executives know all too well, bad actors don’t need text to stir up trouble.
Despite that threat, Waral doesn’t foresee Instagram’s popularity slowing anytime soon. Now adding new users faster than Facebook’s main property, he says Instagram is on pace to surpass 2 billion users within five years.
Of course, that’s great news for Facebook. Per eMarketer, the share of revenue that Instagram contributes to its parent company is set to rise from about 10% to 16%, year-over-year.
However, Instagram’s continued growth could have other negative side effects. Namely, it could embolden critics who are now calling for Facebook to be broken up into smaller pieces.