Report: Instagram generated $20 billion in revenue for Facebook last year

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Instagram is paying IGTV content creators for their work unless they post about politics or social issues.
Image: Instagram

On January 29, Facebook disclosed that it generated $70.6 billion in 2019. The Silicon Valley giant derived most of its revenue from advertising sales, but the firm didn’t break its earnings down by segment. As such, it had been unknown how much revenue each of the conglomerate’s social media applications generated.

However, in a new report, Bloomberg revealed Instagram made $20 billion for Facebook last year.

How Instagram Became So Valuable

Facebook purchased its photo-sharing subsidiary in 2012 for $715 million. At the time, the service had around 90 million daily active users. Moreover, the then two-year-old social network had yet to produce any revenue. However, since then, the platform has significantly expanded its user base and monetization capability.

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By June 2018, over 1 billion people across the world used Instagram, up 200 million subscribers from 2017.

Besides, Facebook gave brands the ability to advertise through the platform via sponsored posts and videos in 2013. The corporation has subsequently introduced new marketing tools like carousel ads and business accounts that offer robust analytics and targeting features. Consequently, the firm has attracted the attention of companies interested in appealing to the service’s young and affluent user base.

Bloomberg’s report indicates Instagram has become an extremely valuable part of Facebook’s ecosystem. Indeed, the social network represented 28.3 percent of the Big Tech firm’s 2019 sales. Moreover, the segment made more money for its parent company than Alphabet’s YouTube, which generated $15.1 billion in ad revenue last year.

The newsgathering service attributes Instagram’s remarkable performance to the fact that it doesn’t share ad earnings with its users. Instead, the platform has developed a thriving cottage industry of influencers who make money promoting products for various brands. Notably, the BBC reported reality star Kylie Jenner earns $1.2 million per sponsored post.

Facebook’s Q4 2019 Performance

Despite facing several major controversies last year, Facebook closed out 2019 on a high note. In the period ending December 31, the corporation generated $21 billion in revenue, up 25 percent from 2018. As such, the firm slightly outpaced Wall Street expectations of $20.89 billion in sales.

In addition, Facebook made $7.39 billion in net income, or earnings of $2.56 per share, a year-over-year increase of 7 percent. Conversely, market analysts believed the firm would only turn in earnings per share of $2.53 in Q4 2019.

The social networking giant also brought its monthly active user count to 2.50 billion in the fourth quarter, up 8 percent from the same timeframe in 2018.

Furthermore, Facebook earned an average of $8.52 for each of its users, beating market estimates of $8.38 by 1.67 percent. The firm also noted that it’s succeeded in selling its advertisers on marketing their wares through its Stories feature. COO Sheryl Sandberg said 4 million brands now opt to use ephemeral video ads compared to 2 million firms in 2018.

Also, Facebook brought in $70.6 billion throughout 2019, an improvement of 27 percent over the year previous. However, the company also saw its total costs and expenses rise by 51 percent to $46.7 billion. As a result, the firm made $18.48 billion in annual net income, a year-over-year decline of 16 percent.

That said, Facebook might see a return to growth in 2020 based on the rising popularity of its Instagram subsidiary.

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