In 2012 Facebook Inc made a business move that shook businesses online - it bought Instagram for $1 billion. At first, this looked as if Facebook was trying to monopolize the social media industry, but analysts say otherwise.

Instagram is Driving Facebook Inc.'s Growth

Since its acquisition, Instagram had become one of the major revenue streams for Facebook. The value of Instagram now has reached $100 billion which is 100x more than what Facebook Inc paid for according to Jitendra Waral, an analyst at Bloomberg Intelligence. Facebook Inc. is now worth $570 billion. But this business move should not be seen as Facebook's way of buying out all its competitors. In fact, Facebook and Instagram weren't even considered as direct competitors. But now that both applications are owned by the same parent company, Instagram is affecting the growth of Facebook although this can also be attributed to the fact that Facebook has already reached its plateau stage.

Facebook Inc. owns Whatsapp, Facebook Messenger, and TBH together with Instagram. But compared to the other acquisitions, Instagram has been generating more revenue than expected. Whatsapp hasn't been profitable since its $19-billion acquisition in 2014.

By the year 2020, Instagram's revenue could reach up to 40% in the United States. Moreover, its total share of Facebook Inc.'s value can reach as high as 25% from its current 16% share today.

The Growth of Instagram

By the middle of June 2018, Instagram announced that it hit 1 billion users which is 200 million more than their user count last year. This growth is only getting started as analysts project a total growth of 2 billion users in the next 5 years. This rate is faster than its parent company's.

Instagram Stories has also reached a wider audience as it is starting to replace Facebook's newsfeed. Instead of scrolling down on a feed, "IG stories" is now becoming a thing among followers on Instagram. You can attribute this to a more real-time representation of what your friends are up to. IG stories are also more customizable than your typical post on Facebook.

Because of the growth of IG stories, Instagram has sped away from its competitor, Snapchat. With just 191 million users per day, Snapchat falls far from Instagram's 400 million active users.

There has also been a decline among active daily users of Facebook according to Recode. This year, Facebook has experienced its first 2 consecutive quarters that had declines on daily usage in North America. At the same time, the number of users in the 11 and below age group is projected to decline by 9.3% according to eMarketer, a market research firm on digital businesses.

Mixed Opinions on Facebook's Move

Although overall, the acquisition of Instagram has greatly increased Facebook Inc.'s value, critics claim that this move has been a big regulatory failure for the tech industry. By buying out the company's possible competitors, Facebook has shown some naiveté in increasing its power over the social media industry according to Lina Khan, the Director of Legal Policy. It has also avoided some scrutiny on the data privacy issue because some users are not aware that Instagram is also owned by Facebook Inc.

Despite differences in views, there is no doubt that the growth of Instagram will enable it to become its own powerhouse in mobile web marketing.

To learn more about how social media marketing and video stories can help drive your business contact us today. 888-434-9225 team@zackgreenfield.com