Instagram’s Emerging-Market Opportunity

In many ways, Facebook‘s (NASDAQ: FB) Instagram property is among the most exciting and promising growth avenues the social media conglomerate has going for it. The popular photo- and video-sharing service is now estimated to represent over a sixth of Facebook’s entire market cap, for instance. From ramping ad sales to e-commerce to IGTV, Instagram has no shortage of levers it can pull going forward to monetize its 1 billion users.

As Instagram’s parent company continues to explore ways to connect emerging markets to the internet, Instagram is now making a time-tested move.

Image source: Instagram.

Say hello to Instagram Lite

Instagram has quietly launched a slimmed-down version of Instagram called Instagram Lite, which was just released on Android, according to TechCrunch. Instagram Lite is significantly smaller than the standard Instagram app and consumes far less data. As one might expect, not as many features are available, particularly data-hungry ones like video uploads, but photo uploads are of course included. Facebook has previously released “Lite” versions of its core Facebook app, as well as Messenger.

Releasing “Lite” versions of apps has become a standard strategy in tech companies’ tool kits, allowing them to cater to emerging markets, where cellular network infrastructure is less developed. Data speeds are slower, coverage can be sparser, and many users in those regions simply cannot afford large or unlimited data plans. Many users may also use more affordable, older mobile devices, which also lack the processing power of the latest and greatest flagship smartphones.

Users come first

While Instagram does not provide granular details surrounding its user base, Facebook’s overall financials are consolidated across all properties. That suggests the geographical monetization characteristics are likely comparable across properties. Advertising average revenue per user (ARPU) is much lower in emerging markets, and the company continues to work on ramping monetization, but the first step is always to build users before focusing on monetization.

For Facebook’s reporting purposes, emerging markets tend to be concentrated in its Asia-Pacific and rest of world segments.

Geographic Region

Advertising ARPU (Q1 2018)

U.S. and Canada






Rest of world




Data source: Facebook.

WhatsApp is already extremely popular in emerging markets as an SMS replacement, but the messaging service is far less of a data-hungry app than Instagram. Besides, Facebook is still trying to figure out the best way to monetize WhatsApp, while it largely already knows how it wants to build Instagram as a business. Instagram Lite is an obvious move to expand the service’s reach around the world.

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Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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