Instagram's Fifth Anniversary: How Good Of A Deal Was This For Facebook?

Instagram is celebrating its fifth anniversary on Tuesday.

Kevin Systrom and Mike Krieger sold their startup to Facebook Inc (NASDAQ: FB) for approximately $1 billion in cash and stock.

When Systrom and Krieger sold Instagram on April 9, 2012, the sale allowed them to live "the sweet life." Spending their days traveling and jet-setting, they don’t seem to be regretting the sale.

On the other hand, there’s Facebook and Mark Zuckerberg. The social media giant paid about $1 billion for Instagram at the time. Since then, the S&P 500 index gained roughly 41.5 percent. Over the same time period, Instagram's valuation increased more than 3,500 percent.

Related Link: Instagram Ads Have Huge Potential For Facebook

There has been much debate about the actual valuation of Instagram. Citigroup recently valued Instagram at $35 billion, up from a previous valuation of $19 billion.

Instagram turns 5 today. User growth recap (M=million) Dec '14 300M Mar '14 200M Sep '12 100M Dec '10 1M Oct '10 100,000 (1st week)

— Jon Erlichman (@JonErlichman) October 6, 2015

Why So Valuable?

In a recent blog post, the company announced it now has more than 400 million users on its platform, surpassing Twitter Inc (NYSE: TWTR)’s 320 million. "Our community has evolved to be even more global, with more than 75 percent living outside of the US," the blog said.

However, a rapidly growing user base is not the only thing supporting Instagram’s valuation. Its incursion into advertising has also been pretty successful and also seems to be driving the company's value upwards.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.