One of the most under-appreciated assets of Facebook Inc (NASDAQ:FB) is clearly its photo-sharing app, Instagram. The market has not been giving Facebook any credit for owning one of the most valuable properties in the social media space. Instagram has seen explosive growth in its user base from April 2012, when Facebook Inc (NASDAQ:FB) acquired it for $1 billion. The increasingly popular Instagram now has more than 130 million users, and is expected to start monetizing this installed user base with ads on photos and videos.
Immense growth potential
Facebook’s CEO made a fantastic acquisition right before its IPO in the form of Instagram. At the time of purchase, Instagram had roughly 27 million users, and fast forward to June 2013, Instagram now has more than 130 million users. Instagram has not only aided in delivering a better user experience on mobile, but also ramped up user engagement on mobile.
Instagram’s user community is very vibrant and robust. The user engagement on Instagram has reached staggering levels. Its rapidly growing user-base now gives out more than 1 billion likes each day on the platform. And the users are diving in and using various photographic filters to make pictures look good, the end result is that – more than 16 billion photos have been uploaded on Instagram.
With the rapid shift from desktop computers to mobile, the number of potential Instagram users can easily multiply from current levels in a couple of years as more and more mobile devices are activated across the globe.
Video sharing and monetization potential
Facebook Inc (NASDAQ:FB) recently introduced the ability for users to share videos on Instagram. The videos would be only 16 seconds long and seems like an improvement on Twitter’s Vine service, which allows users to share videos for only 6 seconds. However, the recently launched Vine already has more than 13 million users, which goes to show that members are interested to take bit-sized videos on social media settings with their mobile devices.
Instagram’s video sharing system provides more filters and editing options which make it more valuable relative to Vine. And most importantly, this is a good stepping stone for Facebook to get into the video space. As video ads are increasingly becoming more valuable, this is a great strategic move on Facebook Inc (NASDAQ:FB)’s part. The 16 sec long videos might be a great way for Facebook to start monetizing video ads. Already Facebook is one of the most important video sharing platforms in the world. According to comScore, Facebook is the 2nd most widely viewed video viewing platform in the U.S. with more than 60 million users, and is second to only Google Inc (NASDAQ:GOOG)’s YouTube in May-2013.
While Facebook Inc (NASDAQ:FB) doesn’t monetize this huge audience of video users, it is widely expected that Facebook will start monetizing video advertisements on Newsfeed. The large number of marketers on Facebook is expected to jump in with video ads on the social platform. And video ads can also be rolled out on Instagram’s new launched service down the road.
As user eyeballs are increasingly shifting towards online video and mobile, so are the advertisers. Google Inc (NASDAQ:GOOG)’s YouTube platform has more than 1 billion visitors, and it is a very valuable property for placing online video advertisements. And Facebook Inc (NASDAQ:FB)’s potential entry into the segment with Instagram’s video and Newsfeed video ramps up the competition. Other major players in online video advertising includes Yahoo! Inc. (NASDAQ:YHOO) and Hulu. Various Yahoo properties had more than 43.6 million visitors in the U.S. in the month of May, according to comScore.