Instagram will be Facebook's next multibillion-dollar business

Facebook is just about to turn on the money jets for Instagram, the photo-sharing app it acquired in 2012 for over $US1 billion. (Remember when that seemed like a lot of money for a tech startup?)

Specifically, Facebook is going to let Instagram advertisers use Facebook’s targeting tools to reach users based on their interests.

How much money are we talking about here? According to an analyst note yesterday from Bank of America Merrill Lynch, Instagram could be a $US300 million business next year, growing more than 12x to over $US3.8 billion by 2020. That $US3.8 billion is about equal to Facebook’s total quarterly revenue today.

As the analysts point out, the site has more than 300 million monthly users who spend an average of more than 20 minutes a day on the site, and 23% of US retailers already have an account there. “We see Instagram monetisation as a lever Facebook can pull to maintain strong overall ad growth,” they write.

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