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Instagram this week launched IGTV, a standalone video app for Instagram users. So Facebook is still pushing to compete with YouTube; that’s cool. But I was more interested in the other news announced at the event in San Francisco: Instagram now has over 1 billion monthly active users.
Let’s put that figure into perspective — Instagram had 400 million monthly active users in September 2015, 500 million in June 2016, 600 million in December 2016, 700 million in April 2017, and 800 million in September 2017 (the last number Facebook shared). In other words, Instagram has been adding some 200 million users every year, at a rate that has accelerated.
Here’s another way to set the scene. Instagram was founded in October 2010. It therefore managed to join the 1 billion user club, of which only a handful of services are members, in less than eight years.
Let’s really put that figure into context. The reason I set the above chart to start in May 2012, when Instagram had just 50 million active users, is because Facebook acquired Instagram for $1 billion the month before, the company’s biggest acquisition to date.
That means Facebook has managed to grow Instagram’s userbase 20-fold in six years. The growth also means that while each user was acquired at the time for about $20, the acquisition’s cost per user has now fallen to just $1.
At the time, Instagram was making no money. The startup didn’t have a business model.
I had to dig up my coverage from 2012 trying to explain the news to find that the purchase price was 27 percent of Facebook’s 2011 revenue. Now, some estimates suggest Instagram is generating about that percent of Facebook’s mobile ad revenue, or over $5 billion in revenue annually.
Six years ago, it looked like the deal made no financial sense. Today, it looks like a brilliant bet that has not only paid off, but paid dividends. Who wouldn’t want to buy a company for $1 billion to see it grow 20-fold and generate quintuple its purchase price every year?
Many made fun of Facebook’s acquisition of Instagram. Now it’s seen as one of Facebook’s best acquisitions.
ProBeat is a column in which Emil rants about whatever crosses him that week.
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