Tuesday, December 23, 2014

Instagram effect for Facebook

Taken from Bloomberg's article
Facebook Shares Rise to Record on Mobile Growth, Instagram
By James Callan and Kelly Gilblom
December 22, 2014

Facebook shares rose to a record as the social network caps a year in which mobile advertising increased and marketing initiatives expanded with applications and video.

The shares advanced 2 percent to $81.45 at the close in New York, the highest price since Facebook’s initial public offering in May 2012. The stock has jumped 49% in 2014, compared with a 12 percent gain in the Standard & Poor’s 500 Index.

This year Facebook made further headway in mobile, a business that has flourished from a minor portion of ad revenue at the time of the IPO to a majority. Facebook’s acquisition of Instagram in 2012 has also been paying off.

Facebook’s stock has more than doubled since the IPO and the company has a market value of $227.8 billion.

Surpassing Twitter
The Citigroup analyst, said he reached his $35 billion valuation for Instagram based on faster-than-expected user growth and increased revenue from advertising. The estimate puts Instagram in the same realm as American Airlines Group Inc., with a market capitalization of about $36.5 billion, and Kraft Foods Group Inc., at about $37.9 billion.

It’s been about a year since Instagram started making advertising available, as Facebook CEO Mark Zuckerberg starts monetizing the app’s audience and data assets. Instagram’s monthly active users rose to 300 million this month, giving it more users than Twitter Inc., which said it had 284 million in October.

Mobile Growth
Sales are projected to surge 46 percent to $3.78 billion in the fourth quarter, according to the average of analysts’ estimates compiled by Bloomberg. Mobile promotions accounted for 66% of ad sales last quarter, up from 62 percent in the prior period and 59 percent in the first quarter, the company said in October.

Marketers have also been paying more for fewer ads. Higher-quality ads, improved targeting and premium video advertising, led Menlo Park, California-based Facebook to more than triple prices for promotions in the last quarter compared with a year earlier.

Facebook is projected to take 8% of the $140.7 billion global ad market this year, up from 5.8 percent last year, according to EMarketer.

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