Facebook Inc.'s purchase of Instagram Inc. continues to look smarter and smarter.
After buying Instagram for $1 billion in 2012, analysts at Credit Suisse Group AG now expect Facebook will get more than triple that price tag in revenue from the photo sharing app this year alone.
"We are now forecasting $572.5 million and [circa] $3.2 billion in revenue contribution from Instagram in [the first quarter of 2016] and 2016, respectively," analysts led by Stephen Ju said in a recent note.
Instagram and premium video will be a big driver for mobile and desktop ad revenue, the team writes. "Our projection for consolidated ad revenue of $5.24 billion in [the first quarter] reflects our projection for $573 million and $260 million in contribution from Facebook's Instagram and premium video ad product, respectively."
Ads and video could become more interconnected than ever.
Ju and team said that in the future, TV commercials could well move to Instagram. "A small number of large advertisers have been allowed to purchase video ads on Instagram that run for as long as 60 seconds (versus 30 seconds prior to February 2016 and versus a 15 second limit for users)–with the likely intent of helping large brands easily migrate their existing offline TV commercials to Instagram."
When Facebook acquired the startup, it had roughly 30 million users. Monthly active users have now ballooned to 400 million as of September 2015, topping that of Twitter Inc. Much of the recent expansion has been outside of the U.S.
"Our community has evolved to be even more global, with more than 75 percent living outside of the U.S.," Instagram said in a recent blog post. "Among the last 100 million to join, more than half live in Europe and Asia. The countries that added the most Instagrammers include Brazil, Japan and Indonesia."
To be sure, Instagram recently launched a new algorithm for the order in which users will see photos, and if this doesn't go over well, people could easily shift to other platforms like Snapchat Inc.