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Instagram's Video Moment: What Wall Street's Thinking

Posted
6/21/2013 9:57:00 AM
By: Chris Ciaccia
Referenced Stocks:FB

Facebook (FB) and Instagram announced that Instagram is adding an option to shoot and share short, 15-second video clips on the social network for its 130 million monthly active users. The new feature will be available on both iOS and Android apps at once, and will sport 13 custom filters to help make the videos more personable.

The announcement also included a helping hand for those with shaky hands, introducing a stabilizing feature called Cinema. Though Facebook shares fell following the announcement, several analysts were impressed by the announcements, noting the potential for revenue opportunity is becoming clearer on Instagram.

Here's what several Wall Street analysts had to say regarding the announcement:

Topeka Capital Market analyst Victor Anthony:

"Facebook introduced 15 second videos to photo sharing app Instagram, along with 13 new filters designed for video only, and a custom cover frame, to its 130mm monthly active users. Instagram also debuted a Cinema feature, which allows users to stabilize the video they capture. 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. Video ads on both Facebook and Instagram position Facebook, as a whole, to capture a meaningful slice of traditional media ad budgets."

Sterne Agee analyst Arvind Bhatia:

"We see today’s announcement of video sharing on Instagram as the first step towards monetizing Instagram, which now has over 130M monthly active users (up from over 100M disclosed last month and 50M last year). Over time, we see video ads on Instagram as well within Facebook's News Feed. Online video advertising is a rapidly growing but fragmented market and we believe these 15-second videos could prove quite effective/lucrative."

UBS analyst Eric Sheridan:

"Based on our checks, Facebook plans to begin selling Newsfeed video ads in 2H 2013. Our estimates assume that Facebook will be able to monetize daily video ad slots in the seven figure range. Our checks also indicate that FB will also begin serving ads on Instagram (no advertising to date) during 2H 2013. In both cases, Facebook must be careful not to overly disrupt the user experience."