Once mocked, Facebook's $1 billion acquisition of Instagram was genius

anderzole writes: In 2012, Facebook shocked the tech world when it acquired Instagram for $1 billion. At the time, the acquisition raised quite a few eyebrows, along with many more questions than answers. Not only did people wonder how Instagram would fit into Facebook’s existing business, many also questioned if Facebook CEO Mark Zuckerberg had lost his mind by outlaying $1 billion for a company that, at the time, had no revenue.

Nearly five years later, Facebook’s Instagram acquisition not only looks like a bargain, but a full-fledged stroke of genius. Today Instagram still shows no signs of slowing down, Instagram’s active user base jumped from 500 to 600 million in just the last 6 months alone, marking its “fastest growth rate ever.” Incredibly, Facebook saw the longterm potential and impact of Instagram and managed to swoop in and acquire the company long before its user base began to accelerate wildly.

From an economic standpoint, Instagram is already paying dividends via highly targeted and lucrative ads. During the first quarter of 2016, for example, it was estimated that revenue from Instagram checked in at $572.5 million and accounted for 10% of Facebook’s overall revenue. In fact, analysts at Credit Suisse believe that Instagram will have delivered $3.2 billion in revenue for Facebook by the time 2016 comes to a close. That’s not bad for a $1 billion acquisition that Facebook is still in the relatively early stages of monetizing.