Instagram announced this week that it has crossed a huge milestone of 800 million monthly users and 500 million daily users, a huge achievement considering the last 100 million sprint took just four months. Instagram announced in April that it crossed 700 million users, and if it maintains the current pace it could easily top 1 billion users by this time next year.
The growth of Instagram has huge implications for Facebook (FB, Financial). Facebook is already near peak penetration levels in most developed markets, and a bulk of user base growth is already coming from the Asia Pacific and Rest of the World regions, where Facebook’s ARPU, or average revenue per user, is much lower when compared to developed markets. As Facebook keeps adding more and more users from these regions, revenue growth rate is inevitably going to keep edging lower and lower.
Instagram’s momentum is no chance occurrence. The photo-sharing app is already enjoying the benefits of the network effect, and users are coming in thick and fast.
Here’s a breakdown of how long it took Instagram to add each 100 million users:
- Oct. 6, 2010 – Launch.
- Feb. 26, 2013 – 100 million; 28 months.
- March 25, 2014 – 200 million; 13 months.
- Dec. 10, 2014 – 300 million; nine months.
- Sept. 22, 2015 – 400 million; nine months.
- June 21, 2016 – 500 million; nine months.
- Dec. 15, 2016 – 600 million; six months.
- April 26 – 700 million; four months.
Source: TechCrunch
As the application got bigger and bigger, the time it needed to add the next 100 million users became shorter and shorter. In eight months Instagram has added 200 million users, compared to the nine months it took in 2015 to add 100 million users. The pace is accelerating because crowds tend to bring more crowds. The only other application where we have seen the network effect provide sustained growth in user base was Facebook, and now Instagram seems to be following in the footsteps of its parent.
The more Instagram grows, the more attractive it will become for advertisers. By the end of the second quarter of the current fiscal, Instagram had 15 million business profiles and 1 million advertisers, compared to 70 million business profiles and 5 million advertisers on Facebook.
The furious pace of user base growth will now start attracting more business profiles and advertisers to Instagram. Facebook already has a much larger advertiser base on its rolls, which will help Instagram adopt advertisers at a faster rate, thus helping Facebook’s overall revenue growth over the next several years.
Disclosure: I have no positions in the stock mentioned above and no intention to initiate a position in the next 72 hours.
