August 26, 2014
Facebook is up in every possible way. Shares up 170%. Earnings per share up 121%. Revenue up 61%. This has primarily been fueled by an explosive growth in mobile advertising. There’s still a lot of room left for this to grow, but it begs the question: Beyond mobile, what will Facebook’s next great source of profit be?
What about that little photo-filter app called Instagram? Slowly but surely, the stage is being set for wide-scale ads on Instagram.
Why Do Ads on Instagram Make Sense?
Below, we’ve laid out reasons why ads on Instagram make sense, signs that a wide-spread ad platform is imminent, and some of the challenges Facebook and Instagram will face along the way.
Usage Patterns Bordering On Addiction
Without mass activity, nothing else really matters. It’s the hardest, most important thing to achieve as a consumer app. Instagram is an addictive app. That’s not an exaggeration — there are numbers to back it up. Most Instagram users are in the app 6–7 days of the week:
Proven Ability To Serve Relevant Content
Ads only work if they benefit all parties involved. Instagram should bring in revenue from them, advertisers should find that they drive meaningful results, and consumers should find them relevant, and often, helpful.
For years now, Instagram users have been telling the system about themselves. Like by like, hashtag click by hashtag click. We’ve slowly taught Instagram all about ourselves. And now, with a recent redesign to “Explore”, we’ve begun to see proof that Instagram has been learning and is ready to do something with all of that information. Up until April, “Explore”, the 2nd tab on Instagram, had been quite static. Content there bordered on Myspace-like. Celebrities and memes dominated.
An Extensive Team of Ad Experts
A Pilot Program Is Underway
Early Results Have Been “Successful”
Much remains to be seen here (more on that below) but Instagram wasquick to come out with stats and case studies after initialad runs with partners. They touted numbers like “9.8 million people reached,” and “24-percent lift in ad recall.”
These are mostly vanity-level awareness metrics, but they prove scale and open the door for more meaningful measurement down the line.
Facebook & Instagram Profiles Are Being Synced
Word came out last month that Mercedes was running a campaign in which Facebook users who saw one of their Instagram ads were treated in a unique way.
The implications here are massive — when Facebook and Instagram “share” information back and forth about a specific user, the profile they can build is perhaps the most comprehensive and accurate ever built in the history of the internet.
Ads Are Being Served More Often
Tools For Scale Are Being Built
The Challenges Ahead
Linking Outside The Great Wall of Instagram
Currently, it’s pretty hard to get *out* of Instagram once you’re in it. Links within the main feed are automatically disabled. Clicking on an ad does nothing (while a double-tap, as we all know, creates a like).
The only place where links work is deep inside a profile, in the bio section. This leaves accounts to come up with ways to draw attention to links that look like this:
A High Creative Bar
Founder Kevin Systrom once described Instagram as “visual crack.”
Advertisers, the challenge to create visual ads worthy of this tagline is on. Systrom has claimed he’s looked at every ad on Instagram so far to get his approval. A smart thing to do early on, but the Systrom-check won’t scale. Instead, Instagram will need to come up with a set of creative guidelines strict enough to keep in the spirit of “visual crack” but loose enough to be realistic for small business owners to create ads on their own.
Instagram’s Next Year
Change doesn’t always come easy. The next 6–12 months for Instagram will be messy. Users will bemoan a changing ecosystem. Ad-free rivals will pop up and gain traction.
Instagram, however, has shown every indication thus far they know how to go about this the right way. They’ve started slow, kept a critical focus on preserving quality creative, and have begun to build tools to equip advertisers with the know-how to play well in their ecosystem.
My bet? On a Facebook earnings call in the not too near future, we’ll hear about revenue growth bolstered by Instagram. Meanwhile, we’ll keep adding filters, double-tapping, and occasionally, clicking on a very relevant, very beautiful Instagram ad.
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