Instagram is now worth $35 billion, which is nearly double its previous valuation.
The photo-sharing app, owned by Facebook, has grown much faster than expected and managed to boost revenue from advertising, which has resulted in the company surging up in value from its previous estimate of $19 billion, a Citigroup analyst, Mark May, said in a note.
Mark May said:
“While Instagram is still early in monetizing its audience and data assets and its financial contribution to FB is minimal today, we believe that it is quickly gaining monetization traction,” adding “faster growth in its audience as well as continued monetization gains by social media properties.”
This current valuation of $35 billion means that Instagram is worth almost the same as American Airlines Group Inc., which has a market capitalization of $36.4 billion.
Mark May boosted his price target for Facebook stock from $86 to $91 and recommends buying the company’s shares.
So far this year Facebook has gained 46 percent, well ahead of the 12 percent increase of the Standard & Poor’s 500 Index. The social networking company is now valued at around $223.4 billion.
This month the Instagram app reached 300 million active monthly users, which makes it more popular than Twitter.
The company also announced that it plans on improving the quality of its user base by eliminating spam accounts. Online this culling has been dubbed as the “Instagram Rapture”.
This elimination of spam accounts has had an impact on the number of “followers” people have.
This can be observed by looking at the change in the number of people following the most popular accounts. The number of Justin Bieber followers dropped by 15 percent to 20.3 million followers, according to Zach Allia, who posted a chart of user losses.
By improving the quality of its users and making sure that they are “real accounts” Instagram is more appealing to advertisers, as they know actual people will view their ads.
May added:
“Not only is Instagram’s audience now larger than Twitter, but its users are about 1.8 times more engaged, and user growth has been greater. Instagram is at the early stages of rolling out advertising, but we believe brands have and will find it an effective channel.”