Instagram will soon carry a lot more advertising. Direct-response buttons, an API for ad buying and Facebook-style targeting capabilities will give advertisers new ways to buy and will lead to rapid increases in ad spending on the photo-focused social network. eMarketer forecasts Instagram will have $595 million in ad revenue this year, rising to $2.81 billion in 2017.
These changes will likely result in their ad business growing rapidly the latter half of the year, as features will roll out over the next several months, and by the end of 2015 Instagram will have a full slate of ad products for advertisers large and small.
“We’ve spent the last 18 months establishing the platform for large brands. The next logical step is to empower businesses of all sizes to be able to achieve their objectives,” said Jim Squires, Instagram’s director of market operations.
Many companies will be eager to test the social network’s new features. Instagram advertising was previously a rare commodity, reserved for McDonald’s, L’Oréal, Mercedes-Benz and other brands that were willing to spend a flat rate of $200,000 to conduct a campaign. Instagram offered those advertisers a limited assortment of image ads, 15-second video ads, and the newest feature, carousel ads, which can display more than one image.
Now that Instagram is opening up to more advertisers, it’s likely to find a lot of pent-up demand.
“Instagram is probably [our] favorite platform right now in terms of pioneering and being willing to try new things,” said Roderick Strother, director of worldwide digital and social at Lenovo, whose Australian arm recently conducted its first Instagram ad campaign. “The importance of Instagram has grown tremendously for us.”
Why Its Hot:
Instagram has a lot of what marketers see as the most compelling package: audience plus strong engagement plus strong brand awareness. The new features seek to make a user-friendly success story into a marketer-friendly one as well, with the help of FB learnings.
- The social network’s ad revenue is projected to increase rapidly, approaching $1.5 billion in 2016 and $3 billion in 2017. Instagram will account for 3.7% of parent company Facebook’s ad revenue this year.
- In 2017, Instagram will have higher US net mobile display ad revenues than Google or Twitter.
- Instagram advertisers will be able to use a full slate of Facebook targeting tools, including the popular Custom Audiences feature. That will be a key drawing card.
- Instagram will set a high bar for direct-response ads, which will have a premium look. Ad load will remain low, which will likely increase prices. This combination will effectively shut out many performance advertisers seeking a low cost per click (CPC).
- Users have shown high engagement with the branding ads that have appeared on Instagram thus far, but that could change as new types of advertisers enter. Appropriate use of targeting and creative will be necessary.
- Instagram will launch ecommerce capabilities with the “shop now” and “install now” buttons, but the kinds of advertisers that will benefit most from them will be those with unusual, limited-quantity or eye-catching products. App installs may fare better—as long as the ads meet Instagram’s creative bar.