Instagram's 5th Anniversary: How Good Of A Deal Was This For Facebook?

Instagram has been around for five years now. In fact, the app is celebrating its fifth anniversary on Tuesday.

About three years and a half ago, Kevin Systrom and Mike Krieger sold their startup to Facebook Inc FB for approximately $1 billion in cash and stock.

Looking back, was this a good deal for Facebook? Was that billion dollars well spent?

When Systrom and Krieger sold Instagram on April 9, 2012, for roughly $1 billion, they probably did not imagine the app would be such a success as it is today. However, the sale allowed them to live “the sweet life.” Spending their days traveling and jet-setting, they don’t seem to be regretting the sale.

On the other hand, there’s the buyer: Facebook – or Mark Zuckerberg. The social media giant paid about $1 billion for Instagram at the time. Since the moment of the purchase, the S&P 500 index gained roughly 41.5 percent; over the same time period, Instagram’s valuation increased more than 3500 percent.

There has been much debate about the actual valuation of Instagram recently. However, there seems to be plenty of agreement around the opinion that it is worth at least $35 billion.

In fact, Citigroup recently valued Instagram at $35 billion, up from a previous valuation of $19 billion.

Why So Valuable?

In a recent blog post, the company announced it now has more than 400 million users on its platform, surpassing Twitter Inc TWTR’s ~320 million. “Our community has evolved to be even more global, with more than 75 percent living outside of the US,” the article notes.

However, a rapidly growing user base is not the only thing supporting Instagram’s valuation. Its incursion into advertising has also been pretty successful and also seems to be driving the company’s value upwards.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.