uploads///Instagram Revenue Estimates

Instagram Set to Churn Out Big Money for Facebook

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Instagram advertisers get access to Facebook’s ad targeting tools

A recent report from Bank of America Merrill Lynch predicts Instagram will earn $300 million in revenues for Facebook (FB) in 2016.

Facebook plans to give advertisers on Instagram access to its ad targeting tools. With these tools, advertisers could focus and purchase ads specific to the users, and in return, users will get to see ads on Instagram that match their interests.

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Current advertising scenario on Instagram

At the moment, advertisers can target users on Instagram by their gender, age, and country. By integrating a user’s detailed information lifted from their Facebook profiles, advertisers should be able to create more relevant ads for their target audience.

According to Bank of America Merrill Lynch, and as per the above chart, Instagram could grow to over $3.8 billion by 2020, which is 12x times greater than the $300 million expected in 2016.

Instagram is a great place to advertise

Instagram has reached the 300 million-user mark, and the majority of its users are young and high-income teens. This is exactly the type of audience big brands are after, so it’s a complete win-win situation for both marketers and advertisers.

According to a survey of 7,500 US teenagers conducted by Piper Jaffray last year, Instagram, Twitter (TWTR) and Facebook were the three most popular social networks among teenagers. Yahoo!’s (YHOO) Tumblr, Google’s (GOOG) Google+, and Pinterest were less popular social networks.

For portfolio exposure to Facebook, you could consider investing in the Technology Select Sector SPDR Fund (XLK), which has 4% exposure to FB.

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