Young and Rich: Why Instagram Is Such a Lucrative Asset for Facebook
As Instagram ads are starting to appear in user news feeds, new data shows the potentially lucrative value of the photo-sharing app for Mark Zukerberg's Facebook (NASDAQ: FB), with research showing Instagram capturing younger and wealthier US consumers.
A report from the Pew Research group says nearly 2 in 10 American cell phone users are actively using the app that Facebook purchased in 2012 for $1 billion. At the time, Instagram was only a niche social network and had yet to make a cent in revenue.
Fast forward 18 months and Facebook is gearing up to start earning back its large investment, rolling out paid 'native content' from a select group of advertisers to US users.
Facebook are right to be optimistic about the advertising rollout.
Buried deep in the Pew report - which showed a continued growth in "curator" and "creator" user generated content behaviour on smartphone devices - was data which showed the Instagram audience is typically very active and from a higher income bracket than another popular photo sharing app, Snapchat.
In fact, of all cell phone users with a household income of $75,000 or more, 21% actively used Instagram. The app also claimed 43% of all smartphone users aged 18-29, 18% of all smartphone users who are college graduates and 23% of smartphone owners with some college education.
Most stunningly, the Pew report found 38% of Instagram users claimed to open the app and generate content on a daily basis, with 24% of users opening the app "several times a day."
Instragram captured 16% of male smartphone owners and 20% of women smartphone users; 20% of African-American smartphone users and 14% of white smartphone users.
Snapchat, on the other hand, was used by 9% of all US smartphone users, capturing 26% of 18-29 year-old smarpthone users. Snapchat users were more likely to be from lower income households. Snapchat claimed 12% of users with a household income of less than $30000 per year and 9% of users from a $75,000+ household income bracket.
Snapchat users were less likely to be college educated, capturing 10% of smartphone owners with a high school education. 8% of college educated smartphone owners use Snapchat.
The data on Snapchat is interesting, as it was reported today in the Wall Street Journal that Snapchat believed it was valued at up to $4 billion.
While the revenue model is now quite clear for Instagram owner Facebook, how exactly Snapchat can leverage its growing popularity, albeit with a less wealthy and younger demographic, remains to be seen.
Instagram / shutterstock
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