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Instagram whose user base grew by more than 50% in the past 9 months, is now valued at $35 billion. That’s 50% greater than Twitter which is valued at $23 billion whose user base grew by a mere 4.8% in the same period.

This latest Instagram valuation by Citigroup comes behind the heels of Instagram’s announcement of reaching the 300 million mark. In contrast, Twitter has only 285 million users. Not only there are more number of users on Instagram than on twitter users of Instagram are nearly twice as engaged (1.8x) Instagram recently started rolling out advertising and Instagram is expected to earn a total of $2.7 billion in ad revenues, according to Citigroup’s estimates.

Instagram Valuation

Instagram Valuation: Citigroup is overdoing it

Citigroup is not the first to say that Instagram is bigger than twitter but it is the latest. Most of the citigroup’s Instagram valuation is based on the assumption that Instagram has wider reach because it has greater user base.

But “reach” is not so simple. When something big happens on twitter, it’s happening everywhere on the internet. Celebrity tweets, corporate tweets often go viral getting extensive coverage not only from Internet but also traditional mass media, Television, Newspapers etc. Instagram is not exactly on the same level as twitter on that, yet! That’s partly the reason why twitter’s CEO, Dick Costolo is pushing analysts towards different types of metrics for evaluating the reach of a website.

But that of course, doesn’t mean Instagram Valuation is totally off. Instagram still has users who are nearly twice as engaged as the twitter users. Since its first roll out of ads in 2013 in US, Instagram was able to acquire well-known brands such as Coca-Cola, Disney, Taco bell JetBlue.
Besides, it is already proven that visually attractive ads, attract more clicks and they most certainly will work better than a 140 character long attempt at wit by a company’s marketing department. This, coupled with the engaged users have the potential to earn big bucks for Instagram.

Instagram Valuation might, at this point, seem a little bloated. But nevertheless, instagram has a promising potential to facebook. Back when facebook bought instagram for $1 billion, many critics made fun of the deal. Guess who’s laughing now!