Ads in Instagram Explore may be US$1 billion goldmine to Facebook

Advertisements in Instagram Explore will generate additional revenue of US$1 billion to Facebook Inc. (AFP pic)

LONDON: Adding advertising to the Explore tab in Instagram could be worth US$1 billion in revenue for Facebook Inc. by 2021, according to Morgan Stanley analysts.

New advertising will appear when users on the photo-sharing social network tap into Explore posts and scroll to see related content, with the main grid to remain ad-free. The move “speaks to how Facebook continues to find ways to extend its earnings runway by monetising under-monetised engagement and usage,” analyst Brian Nowak says.

Nowak says that if Explore can be monetised to the tune of US$2 per user by 2021 and user growth rates can be maintained, it could add around US$1.2 billion to group revenue. That would translate to 2% upside to current earnings estimates at Morgan Stanley.

There are two potential hurdles Nowak sees. First, how quickly Facebook will push out the product. Second, how much of the ad spend will be incremental and how much will be drawn from other Facebook products like Instagram’s newsfeed, stories or the Facebook news feed options.

Explore ads are the latest in a line of efforts by Facebook to monetise its products. Deutsche Bank AG analysts say Watch, Facebook’s video-streaming service, could be worth US$5 billion in revenue over the next few years