Facebook’s $1 billion acquisition of Instagram sure seems to be paying off: A new report indicates that Instagram is well on its way to becoming a $1.8 billion to $3.7 billion a year business over the next few years, and that the photo-sharing app is already worth more than a billion dollars. MoffettNathanson, the research firm that compiled the report, also sees Instagram becoming a huge advertising cash cow for parent company Facebook.
Facebook has not traditionally discussed revenue or profit numbers from Instagram. But MoffettNathanson’s research, which is based on interviews with industry figures and the extrapolation of multiple scenarios, indicates that Instagram could earn $5 billion in revenue each year once the brand is “mature”. According to Re/code, MoffettNathanson actually considers this a “conservative” estimate, and notes that the number could rise to even $11 billion. And if Instagram finds a way to incorporate e-commerce into its interface, like Facebook and Twitter–the app is hugely popular with fashion brands and bloggers–that number will only get bigger.
MoffettNathanson says its calculations are largely based on Instagram’s aggressive advertising strategy, which was implemented just last month; it includes landscape video and photo ads, video ads that last up to 30 seconds, new delivery and optimization tools, and a new type of ad unit called “Marquee” that allows advertisers to blast large portions of Instagram’s user base in short bursts of time.