Instagram’s Ad Sales Are Expected to Top $2 Billion by 2017

It will outsell Google and Twitter for display, eMarketer says

Instagram will generate almost $600 million in ad sales this year, according to eMarketer's first report on the photo-sharing mobile app. The research firm also predicted Instagram will earn $2.81 billion in ad sales by 2017, outselling Google and Twitter when it comes to U.S. display ads.

Instagram has slowly developed its advertising model with sponsored images and videos as well as automated tools for delivery and measurement. The app's ad platform has benefited from its close relationship with parent company Facebook, which bought it for $1 billion in 2012.

"We expect to see rapid growth in Instagram's ad revenues this year and throughout the forecast period—driven by high demand for the social network's new ad products, which will expand beyond branding to include direct response, the ability to buy ads via an [applications programming interface], and enhanced measurement and targeting features," eMarketer said in its report today.

Facebook is set to announce second-quarter results on Wednesday, but it does not break out how much money Instagram makes. The eMarketer numbers appear optimistic, and today a research note from a Wall Street bank prognosticated around $2 billion in Instagram revenue by 2017.

"Monetization is moving at a 'measured pace,'" wrote Robert Peck, an analyst at SunTrust Robinson Humphrey.

With WhatsApp and Oculus Rift in the mix, Peck also predicted Facebook would be able to turn all these businesses up, however. And then there's the main business—Facebook proper.

Facebook is expected to report $4 billion in revenue for the second quarter this week, with ad revenue growing about 15 percent year over year. 

For now, Instagram makes up a small percentage of that revenue, but eMarketer estimates it could represent more than 10 percent of all ad sales by 2017, according to its report.