Brief:
- Instagram's 2019 revenue totaled $20 billion, making up more than a quarter of parent company Facebook's sales, Bloomberg reported, citing unnamed sources familiar with the figure. The sales figure is about 33% higher than the $15.1 billion in ad sales for Google's YouTube, as parent company Alphabet this week divulged for the first time.
- Facebook didn't confirm the sales figure to Bloomberg, as it typically doesn't break out numbers for its "family of apps" that include the main social network, Instagram, Messenger and WhatsApp. The company last week reported its total app user base had grown 7.6% to 2.26 billion in Q4 from a year earlier.
- Facebook acquired Instagram for $715 million in 2012, when the photo-sharing app had 30 million users. Instagram had grown to 1 billion users in 2018, when Facebook last reported the figure.
Insight:
The leaked information about Instagram's annual revenue provides some insight into how much marketers spend on the photo- and video-sharing app compared with other digital platforms. The report indicates how dependent Facebook has become on Instagram for ad growth ever since boosting efforts to monetize the platform, as it's similarly done with the core social network.
Facebook also has added more shopping features to Instagram, giving marketers the possibility of generating direct sales from their advertising. The app last year added "Checkout with Instagram" opening the possibility to diversify its revenue with commissions and fees from e-commerce.
Online payments are a significant opportunity for Facebook and other digital platforms as the digital ad market matures. The growth of digital ad spending is forecast to drop to 8% worldwide by 2023 from 16% this year, according to eMarketer research. That slowdown will leave companies fighting more aggressively for limited ad dollars.
The well-timed revelation also comes as other companies report their year-end results, providing a look at how much marketers have boosted their spending on digital ads in the past year. For example, Google's parent company Alphabet this week reported 16% growth in ad sales to $134.8 billion for the full year, including a 36% gain to $15.1 billion for YouTube. Facebook last week said its ad sales jumped 27% to $69.7 billion, while Amazon's ad revenue rose 39% to about $14.1 billion for the year. Google, Facebook and Amazon are the biggest sellers of digital advertising in the U.S., forming what Forrester has called a "triopoly."
Facebook's dependence on Instagram, which has helped the company to reach a younger audience amid growing competition from Snapchat and TikTok, likely explains why CEO Mark Zuckerberg has objected to calls to break up the company, as Bloomberg notes. The U.S. Department of Justice, the Federal Trade Commission and attorneys general from most states launched an antitrust investigation into Facebook. Senators Elizabeth Warren and Bernie Sanders, both Democratic candidates for president, have said that Facebook must be split up. Even the social network's co-founder, Chris Hughes, last year recommended a company breakup in a New York Times op-ed.
