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TheStreet Open House

Facebook's Next Big Money Maker: Instagram

NEW YORK (TheStreet) -- A lot of people, including myself, questioned why Facebook (FB) bought Instagram when the social networking giant was already photo-centric. Now we have our answer. Instagram's growth is not stopping, and that could mean big business down the line.

Now, nearly two and a half years later, over 100 million people use Instagram every month. The popular photo sharing site has surpassed 100 million monthly active users, according to its blog, marking 11.1% growth in the past 40 days.

"It's easy to see this as an accomplishment for a company, but I think the truth is that it's an accomplishment for our community," said Instagram founder Kevin Systrom in the blog post. "Now, more than ever, people are capturing the world in real-time using Instagram--sharing images from the farthest corners of the globe. What we see as a result is a world more connected and understood through photographs."

Investors initially questioned Facebook's expensive acquisition, as the social network paid almost $1 billion for Instagram in cash and stock. That amount was later reduced after Facebook's share price fell before the deal closed.

Instagram is an incredibly popular and powerful social network that reaches far and wide. I use it quite frequently, and not just for taking pictures. I use it to keep up with friends and see what they're doing.

There was a huge outburst in late 2012 when Instagram announced plans to change its terms of service and allow photos to be used in advertisements on Instagram and, potentially, on Facebook. Because of the uproar, Instagram reverted this policy, and went back to its original ways.

Yahoo's (YHOO) Flickr photo sharing service benefitted from the Instagram flub, but Instagram is still the dominant photo-sharing social network, behind only Facebook. It's the number one free app on Apple's (AAPL) App Store, and continues to see strong user adoption.

Eventually Facebook and Instagram will figure out a way to monetize its vast user base, driving a major return for shareholders.

They may even want to take a picture of it.

--Written by Chris Ciaccia in New York

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