Instagram was just two years old, with only 13 employees and bringing in no revenue, when Mark Zuckerberg bought it for one billion dollars. As Facebook headed for its first IPO, the tech markets wobbled. Pundits wondered if Harvard genius and 27-year-old Zuck was impulsive and imprudent.
But five years later, even with its eye-watering price tag, there’s no question: that deal was the sale of the century. Here are four reasons why you might want to listen to Mark Zuckerberg next time you need a good return on $1 billion.
1. Mobile first: Facebook was floundering, with a mobile app so dire that most people accessed it via desktop or simply went elsewhere. Instagram, on the other hand, has remained defiantly mobile-only since day dot. And its youthful demographics have hauled Facebook out of grandpa’s party into hipster heaven.
2. Explosive growth: In the space of five years, Instagram has rocketed from 30 million to 700 million active monthly users. The Motley Fool says: “What's notable about Instagram's growth is that it is occurring at an accelerating rate recently. It took Instagram about nine months to grow from 400 million to 500 million users, six months to grow from 500 million to 600 million users, and approximately four months to grow from 600 million to 700 million users.”
3. Revenue, baby: One analyst thinks Instagram alone will double Facebook's revenue in the next four years - maybe even hit $22 billion by 2021. It’s well-known that teens engage best with advertisers on Instagram. So most Facebook advertisers buy ads on Instagram as well. And when your client roster includes Nike and General Motors? Win-win.
4. Trusted funds: Mark Zuckerberg has proved he can buy out the competition and let them get on with the job. His hands-off approach means he is trusted by the people he wants to invest in his next venture, whatever that will be.
Will it be Snapchat? Not for want of trying. Right now, Snapchat seems to be the one that got away. Not only did it rebuff a reported Facebook buy-out of $3 billion in 2014, it’s built a number of genius features so cool that others can only copy them.
Instagram Stories is a very close relative of Snapchat’s main USP - messages that disappear without trace. However, according to David Eisenman, co-founder and CEO of advertising agency Madwell, Snapchat is still stealing a march on the Facebook/Instagram onslaught. One example of this is the function that allows Snapchat advertisers to place their ads next to publisher content on Snapchat Discover.
Only time will tell if Instagram proves to be the golden goose or cash cow that Mark Zuckerberg realised five years ago. One certainty is this: Facebook will keep buying up the opposition or copying its features, until something bigger than Facebook evolves. Watch this space.