Bank Of America: Facebook Just Turned On Instagram's Advertising API
In a report published Thursday, Bank of America analyst Justin Post commented on Instagram's latest marketing initiatives as Facebook Inc (NASDAQ: FB) just "turned on" Instagram's advertising API (application programming interface) to marketing partners.
According to Post, Instagram's ad initiatives will include access to Facebook's ad targeting tools, "call-to-action" buttons such as Shop Now, Install Now and Signup Now, and rolled-out Carousel ads that enable advertisers "more flexibility in telling their stories." In fact, Nanigans (a large marketing partner) highlighted it has seen "growing demand" from current and prospective customers to access the Instagram advertising ecosystem.
What It Means
"Turning on the API is a big step towards scaling Instagram ads, and we would expect many positive data points on Instagram from advertisers over the next 12 months given strength of the platform," Post wrote.
Post continued that the API allows all advertisers to purchase and measure ads on Instagram, based on algorithms that are likely similar to what Facebook uses on its core platform. As such, the move will allow a more real time and direct response for advertisers.
Post also commented that Instagram's user base (which is likely still below 400 million) has exceeded his expectations since the social media platform was acquired by Facebook. In addition, Instagram users spend over 20 minutes per day on Instagram, which "sets the foundation" for "material" advertising revenue.
Bottom line, Post noted that Instagram has "material ad potential" and should "conservatively" see $110 million in advertising revenue in 2015, growing to $300 million in 2016 and $910 million in 2017. The analyst also suggested that over the long term, Instagram faces a $4 billion plus revenue opportunity, potentially valuing the platform in the $30 billion to $37 billion range.
Shares of Facebook remain Buy rated with an unchanged $115 price target.
At 1:03 p.m. EST, Facebook was trading essentially flat at $94.47.
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