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Acquisitions: Facebook has hit the right note with these two deals

In an earlier article, we alluded to the successful acquisitions done by The Walt Disney Co. (NYSE: DIS). Like Disney, Facebook Inc. (NYSE: FB) made the right move by acquiring these two companies which would have made formidable opponents if they had stood alone.

Instagram

Instagram is a photo and video-sharing service which was founded by Kevin Systrom and Mike Krieger in 2010. Instagram managed to garner 1 million users in two months, becoming immensely popular. In 2012, Facebook acquired the company for $1 billion, which proved to be a smart move because Instagram’s value continues to increase.

Instagram is one of the most popular social media apps in the US and it reached over 1 billion monthly active users worldwide as of June 2018. Facebook does not give out Instagram numbers but based on data from Statista, the number of Instagram users in the US totaled 100.5 million in 2018. This number is expected to increase by 6% to 106.7 million in 2019 and further increase by 25% to 125.5 million by 2023.

The graph shows the estimated growth in Instagram users in the US. User count is expected to reach 126 million in 2023

Instagram rolled out several features which were similar to Snapchat and has now overtaken the latter in terms of popularity. Instagram continues to add new features to drive user engagement and these efforts appear to be paying off.

According to a report by Kinsta, as of July 2019, Instagram had 2 million advertisers on its platform versus 1 million just six months ago. Instagram is projected to generate $10 billion in ad revenue in 2019. Comparing this figure to Instagram’s acquisition price, Facebook has certainly managed a bang for its buck.

WhatsApp

Instant messaging service WhatsApp was founded by Brian Acton and Jan Koum. Facebook acquired the service in 2014 for $19 billion, its biggest acquisition so far. According to data from Statista, WhatsApp had 1.6 billion monthly active users worldwide as of July 2019. The number of WhatsApp users in the US is estimated to reach 85.8 million in 2023.

WhatsApp does not share the popularity of Instagram in the US but has a strong presence in international markets. According to a report by Business of Apps, India is the largest market for WhatsApp with the number of users estimated at 300 million as of January 2018. This number is anticipated to increase in 2019. WhatsApp is also immensely popular in Brazil, Mexico and Africa.  

Also read: Facebook Q2 2019 Earnings Report

In 2018, WhatsApp introduced WhatsApp Business in five countries, including the US and UK, and also rolled out WhatsApp Payments in India. At present WhatsApp’s revenue model is not very lucrative but Forbes estimates that WhatsApp has the potential to generate up to $15 billion in revenue over the coming years with ARPU rising to $12.

With Instagram’s popularity in the US and WhatsApp’s strong presence internationally, Facebook seems to have picked the right combination of assets to drive growth going forward.    

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