Without Facebook, Instagram Valued at $100 Billion

Did Facebook Inc. (FB) purchase Instagram for cheap? Recent valuations say so. A new estimate reveals that if Instagram were a standalone company, it would have been worth $100 billion today, according to the data compiled by Bloomberg Intelligence.

The photo-sharing service recently hit 1 billion monthly active users, and the steadily increasing user base is expected to shoot revenue past $10 billion over the next 12 months. While parent company Facebook is reportedly losing younger audiences, its loss has been a boon to Instagram and other social media services including Snap Inc.’s (SNAP) Snapchat, owing to features that better appeal to younger people. (See also: Aging Facebook Losing Teens: Pew Research Survey.)

What Makes Instagram So Valuable?

While Facebook continues to grow and has surpassed the 2.2 billion user milestone, Instagram is gaining new users at a rapid pace and is on course to get 2 billion users on its platform over the next five years, the study suggests. During the past year, Instagram contributed 10.6% to revenues at Facebook, per eMarketer data, while over the next year it is expected to account for around 16% of the parent company’s revenue.

Instagram's future growth may be accelerated by the recently launched IGTV, an iOS- and Android-supported app-based video hosting and sharing service that will compete head-on with Alphabet Inc.’s (GOOGL) YouTube service. IGTV supports videos up to one hour in length, up from the previous one-minute limit. However, Bloomberg report further cites that most of the revenues for the year 2018 will still be sourced from the standard ads served on the Instagram’s news feed, and the TV platform may take time to gain traction among users. (See also:  How Instagram Makes Money.)

While Facebook’s user growth has stalled in the U.S., Instagram continues to grow in the region. Its user base is younger, and that makes it more attractive to the online advertisers. (See also: Twitter Vs. Facebook Vs. Instagram: Who Is the Target Audience?)

Facebook purchased Instagram in 2012 for $1 billion. Two years later, the Instagram unit was valued at around $35 billion by Citigroup Inc. (C). With the unit’s valuation hitting $100 billion, Facebook indeed appears to have made the right move by buying the service at what now looks like a bargain price. (See also: Top Companies Owned By Facebook.)