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From $1 Billion To $35 Billion: How Facebook's Big Bet On Instagram Paid Off


In a note Friday morning, analysts at Citigroup proclaimed that Instagram is now worth $35 billion instead of the $19 billion that it had previously valued Instagram at.

CNBC's Jim Cramer and David Faber discussed the note with Citi’s analyst and how Facebook Inc (NASDAQ: FB) was ahead in its thinking when it acquired Instagram for $1 billion just two years ago.

Cramer shared his thoughts first:

“Now when you go back to the April 9th 2012 chatter, when they bought Instagram for a billion, it was a laughing stock acquisition because there were 13 employees, okay, and people said: 'This is an example of how Facebook has no discipline, that Mark Zuckerberg doesn’t care about shareholders, that in the end this company will just become, I’d say fly by night, just like 2000 Webvan...' Who’s laughing now?"

“In fact," Faber added, "I know by watching my 12 year old and his friends how ubiquitous this service is amongst that generation, which you think advertisers are very interested in...

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"Then there’s WhatsApp," he added, "which they spent $22 billion. That was quite a multiple disparity with Instagram, but back to this, the Citi note cites the increase in number of advertisers that are on the platform, the fact that they are not fully monetizing.”

He continued, “Their [Citi] point is if you fully monetize, you take what they are doing, you fully monetize, you get to...$2.7 billion in revenues in calendar year 2015, then you throw a multiple on that

"It’s a big number.”


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