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TheStreet Open House

Instagram's Time Has Come

Stocks in this article: FBAAPLGOOG

NEW YORK ( TheStreet) -- Many believe Facebook's (FB) purchase of Instagram last year is starting to look a lot better, not only from a strategic standpoint but for revenue potential as well. Now, all the company needs to do is show it to the market.

Thursday's announcement to bring video to Instagram will eventually allow the company to showcase video ads on the social network to its 130 million monthly active users. Instagram has lost a little luster to Twitter's Vine, which allows users to take 6-second video clips and share them.

Instagram's service, available immediately on both Apple's (AAPL) iOS and Google's (GOOG) Android, is a little different. The videos are 15 seconds, and allow users to put a personal touch on them, with 13 new filters designed specifically for video, something advertisers and users will love, eventually.

Topeka Capital Markets analyst Victor Anthony is especially positive on the announcement, noting that the 15-second length has some meaning behind it. "The 15-second time limit coincides with what we have heard is the exact length of time for Facebook's planned launch of auto-play video ads, leading us to conclude that video ads on Instagram are on the come," Anthony wrote in a note. "Video ads on both Facebook and Instagram position Facebook, as a whole, to capture a meaningful slice of traditional media ad budgets." Anthony rates Facebook shares "buy" with a $40 price target.

Sterne Agee analyst Arvind Bhatia agreed with Anthony, but noted it will take time for this to play out. "Over time, we see video ads on Instagram as well within Facebook's News Feed," Bhatia wrote in a note. "Online video advertising is a rapidly growing but fragmented market and we believe these 15-second videos could prove quite effective/lucrative."

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