Instagram, the photo touch-up and sharing app, doesn’t make a penny in revenue from consumers, but it’s picking up users faster than you can click on a point-and-shoot camera, and the app is, well, just kind of great. Now, Instagram is poised to pick up another round of funding worth about $40 million, which will value the startup at $500 million, according to sources.
The WSJ, which was the first to report that the company was raising a new round of financing, says the new valuation is about 20 times what the company was worth a year ago, when it raised $7 million from Benchmark Capital, Baseline Ventures and Andreessen Horowitz. Instagram itself has not confirmed the new financing.
Instagram, a free app for the iPhone that lets users share their photos via Facebook, Twitter, email and various other networks — as well as its own Instagram network — has picked up 15 million users in two years.
And despite the fact there are other photo apps with filters, and that it is only available for the iPhone (and camera-equipped iPod Touch devices), it has become one of the more coveted of apps by users of other devices.
(More than once, I’ve heard people lament that one of the major setbacks of Windows Phone was that it lacked Instagram. It has similar apps, of course, but they’re not Instagram.)
For the record, Instagram says it is working on “making the iPhone experience as solid as possible” before moving on to Android, BlackBerry and all the rest.
That “experience” has varied quite a lot over the last year, with one update raising particular ire among users who felt that the new filters and new versions of old filters were worse than what Instagram had originally built (this was my favorite dissection). Over time, the app has added more functionality, and even in some cases reversed changes, and has continued to boom in the process.
While companies like Facebook have planned out pretty specific ideas of how they will make money in the future, if Instagram has a similar strategy, its founders Kevin Systrom and Mike Krieger have kept those cards pretty close to their chests. And that, according to the WSJ, has even made the new fundraising problematic, with some investors backing off because of the “immaturity” of the business model.
While paid services, in the form of filters, seems like one obvious direction for Instagram, another area might be around offering marketing services using the photosharing as part of bigger brand campaigns. That’s already being done on an informal basis by some brands that have their own Instagram accounts. But as the WSJ points out, other services like display advertising, daily deals or other location-based services may be more awkward fits.