Last year, Facebook raised eyebrows when it agreed to acquire Instagram for a hefty $1 billion, even though the final purchase price ended up a bit lower. The social network recorded $435 million in goodwill on its balance sheet related to the deal, which represents potential risk should Instagram not live up to its lofty expectations.
Inevitably, Facebook would need to monetize the popular photo-sharing service, and that's exactly what's about to happen. Instagram is preparing to launch its ad platform next year, which could potentially be a major opportunity considering its large user base. Facebook has learned a lot building its own mobile ad business, and the company could redeploy those lessons within its Instagram subsidiary.
In the following video, Chris Hill discusses the prospects of Instagram ads with Evan Niu, CFA, and Jamal Carnette.