Instagram may be the biggest source of revenue growth for Facebook (NASDAQ:FB), but it still has a long way to go before user monetization catches up with its parent company's flagship platform. That's not going to change anytime soon. Facebook will generate about $226 per user in the U.S. in 2021, according to an estimate from eMarketer reported by Axios. Analysts expect Instagram to bring in just $126 per user in the U.S. that year.

In fact, eMarketer expects the monetization gap between Facebook and Instagram to grow over the next couple years. That's despite declining engagement on Facebook and increasing engagement on Instagram.

Breaking down eMarketer's outlook provides several key takeaways for investors.

The address sign featuring the like symbol at the entrance to Facebook's campus.

Image source: Facebook.

Saturated Instagram feed ads

One of the biggest takeaways from eMarketer's outlook is that it expects the pace of growth at Instagram to slow over the next two years compared to the last two years. That's likely a result of Facebook CFO Dave Wehner's recent disclosure that the company has reached ad load saturation for the Instagram feed. The negative impact on engagement from showing users more ads would be greater than the positive impact on ad revenue.

Facebook said it reached ad load saturation on its flagship platform about three years ago. Still, it saw a considerable increase in average price per ad impression over the next couple years, which helped propel user monetization further. Instagram could experience a similar trajectory in average ad price over the next couple years. That said, Instagram's ad prices may be closer to equilibrium than Facebook's were three years ago due to the integration of its ad inventory in Facebook's ad-buying tools.

Facebook's new ad revenue sources 

Facebook's flagship platform has a couple sources of high-quality advertising real estate that it's still growing.

Facebook launched Watch, its video platform, about two years ago. Growth started slowly, but it now has 140 million daily active viewers averaging 26 minutes of video per day. That's nearly double from where it started the year. Watch provides marketers a source for high-quality video ads. Furthermore, there are fewer brand-safety concerns since Watch content is more curated than the content in Facebook's feeds.

Facebook is also starting to monetize Marketplace, its Craigslist competitor. Facebook only just expanded Marketplace ads beyond the U.S. in the first quarter, and it's "seeing positive early results," according to COO Sheryl Sandberg. Facebook is heavily focused on commerce going forward, and Marketplace could become an even bigger source for valuable ad inventory.

As Facebook increases its engagement and monetization of Watch and Marketplace, it should see an uptick in revenue per user. Comparable features on Instagram -- IGTV and Checkout -- are still in the very early stages, so they have a longer way to go before they have any meaningful impact on revenue.

Stories ads still offer a lot of long-term growth for Instagram

Perhaps the most important takeaway for Facebook investors is that Facebook still has a long road ahead to fully monetize Stories. The rapid rise in engagement on Instagram is largely due to Instagram Stories. Over 500 million people view or post Stories every day on Instagram.

But management thinks it will take a long time for that engagement to turn into meaningful revenue. "Ultimately, we believe we can increase demand for Stories as we attract more advertisers and bring more effective direct response units to Stories," Wehner told analysts on Facebook's first-quarter earnings call. "Over time that will play through to increased prices, but this is going to take years, not quarters."

The Stories format is drastically different from Facebook's feed ads. Facebook started placing ads in News Feed at the start of 2012, and average ad prices still continue to climb as it rolls out new products, attracts more marketers, and helps advertisers optimize their campaigns. Stories are well behind Facebook's feed products when it comes to monetization, and the growth in ad revenue is likely to follow a similar path: growing engagement and demand, increasing ad load, and finally leveraging price.

With Instagram engagement shifting toward Stories, the monetization gap between it and its parent company's flagship app is likely to remain fairly wide. But as Facebook optimizes ads in Stories over the long term, the gap may start to close, and Instagram will still be a massive source of revenue for the company next decade.