Instagram is set to turn a huge profit for Facebook this year

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Instagram, the envy-inducing home to people that are richer, fitter, healthier, and more attractive than most other social media users, is on course to have a massive year.

The photo-sharing app that currently boasts over 400 million users is expected to rake in $3.2 billion in 2016 alone, according to analysts at Credit Suisse. Additionally, $572.5 million of that massive total will have been generated during the first quarter of the year, reports CNBC.

From the perspective of the platform that owns Instagram, the news couldn’t be any better. Facebook initially purchased the app for $1 billion in 2012, when it had just 30 million users. Four years down the line, and Instagram looks set to make more than triple its price for Zuckerberg and co. Currently, Instagram is home to its own set of influential users (from rich kids to models), and is arguably crucial to any celebrity’s social media strategy. Then, of course, there are the hundreds of millions of users that have adopted the platform, seeing it overtake rival Twitter by the end of 2015.

Although, the Instagram acquisition was later overshadowed by Facebook’s record-breaking $22 billion payout for messaging service, WhatsApp, the photo-sharing network has evidently proven itself a valuable investment in a short span of time.

That growth is being attributed to its monetization strategy, which includes a focus on premium video and dynamic product advertising. Consequently, the billions being generated by Instagram will make up over 10 percent of Facebook’s overall revenue during the projected period. That will certainly ease the pain of Facebook’s failed Snapchat acquisition. It is also helping its parent company establish a larger stake in mobile advertising revenue, which is set to grow by 2 percent (to reach 82 percent) for Facebook in the first quarter of 2016. 

Since introducing advertising to Instagram three years ago, the app has seen a sharp increase in the number of brands using it to promote products. Some investors are allegedly concerned at the implications this will have for future growth, although Facebook insists that it has not seen any user backlash to sponsored content. What has troubled the app’s user base is its decision to roll out an algorithmic timeline — much like Facebook’s.

Facebook is due to announce its first quarter earnings on April 27.


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