When Facebook bought Instagram for $1 billion in 2012, critics of the social network said the deal was another sign of Silicon Valley overreach. Instagram, a photo sharing app with just 30 million users at the time, had no revenues. Facebook, still a private company at the time, was making its biggest and riskiest deal yet. And few start-ups, let alone apps, were valued at $1 billion or more. Less than three years later, Facebook looks prescient. Silicon Valley is awash in billion-dollar start-ups, and Instagram is valued at $35 billion.
When Facebook bought Instagram for $1 billion in April 2012, the price tag came as a shock to many. A little more than two years later, Citigroup said Instagram is worth $35 billion, a number that the bank called “conservative” in a research note on Facebook issued Friday. It is another piece of good news in what has been a stellar 2014 for Instagram. The photo-sharing app recently hit 300 million active users, putting it ahead of Twitter. At $35 billion, Instagram would also be worth more than Twitter, which currently has a market cap around $23.3 billion. Citi’s analysts added, however, that the valuation is speculative and dependent on efforts to generate more money from the app. “While Instagram is still early in monetizing its audience and data assets, and its financial contribution to [Facebook] is minimal today, we believe that it is quickly gaining monetization traction, and would contribute more than $2bn in high-margin revenue at current user and engagement levels if fully monetized,” Citi analysts wrote in the note.
