Instagram is taking a long-awaited step to launch itself into the advertising arena.
The three-year-old photo-sharing site announced late Thursday that it will begin accepting photo and video advertisements, creating a potentially important source of revenue.
Wall Street immediately cheered the news. Shares of Facebook, which purchased Instagram in April, rose nearly 4 percent Friday to about $51 a share.
Generating advertising revenue has been one of Facebook’s greatest challenges. But after several missteps, the company has recently strengthened its advertising chops, especially for its mobile audience.
Arvind Bhatia, an analyst for the brokerage firm Sterne Agee, raised his price target for the company’s stock, citing the Instagram news. Facebook’s stock could reach $58 a share within the next year — if it can bolster its advertising products on the Web and mobile devices, Bhatia said.
Critical to that continuing effort is successfully integrating advertising onto Instagram, which has more than 150 million users, analysts said.
The photo service has a slightly different feel than Facebook — more immediate and less formal. Its broad, young audience could make it an attractive platform for advertisers, analysts say. The company recently added the ability to post 15-second videos to the site, which advertisers will soon be able to use.