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Study on Instagram Advertising

A new report from L2 Insight has just been released, covering Instagram’s recent efforts into the advertising space. The Facebook-owned company has made slow and careful steps over the last few years, carefully managing its user base while increasing its offering to advertisers. The result is paying off: In 2014, Instagram generated $700 million in revenue and is projected to make $5.8 billion by 2020. Using specific user case, the L2’s report sheds a deep inquisitive light on what appears to be a very well-crafted and effective strategy  to take full advantage of Facebook’s data to deliver unique  advertiser experience. From the introduction:

Following in Facebook’s Path

While brands have continued to enjoy 100 percent organic reach on Instagram, the platform has continued rolling out new advertising options that allow a brand to amplify its social reach. Since the introduction of advertising to Instagram in November 2013,1 the platform has expanded its advertising offerings to include video, a series of pictures users can swipe through referred to as carousels, and, most recently, announced that all advertisements will be able to include calls to action (CTAs), no longer limited to the carousel ad.

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In June 2014, Instagram migrated its images and data from Amazon’s cloud computing service to Facebook’s data center. The migration enables Instagram to leverage Facebook’s systems for analyzing massive amounts of data and gives it the ability to use Facebook’s data as well as its targeting capabilities.2 While Instagram insisted data would remain siloed between the two platforms, the intent to build in data sharing as a core of the business was confirmed in a February update to Facebook’s privacy policy.3 Moreover, there are examples where Instagram has targeted users based on Facebook’s data and then retargeted ads on Facebook based on the user’s interaction with the Instagram post.4,5 With 94 percent of Instagram users also having a Facebook account, this cross-platform strategy has proven to be effective.6 Mercedes-Benz was cited as having experienced a 54 percent increase in website visits when advertising on both platforms.7

Brands should be prepared for Instagram to follow in the steps of Facebook, which has made modifications to its algorithm to the point that the organic reach of content has become practically negligible. This potential wall between brands and their communities of fans would force brands to invest more into Instagram in order to reach their target demographics.

The full report can be downloaded from the L2 Insight website

  1. Instagram Launches Ads with Sponsored Post from Michael Kors,” Chris Welch, The Verge, November 1, 2013.
  2. How Facebook Moved 20 Billion Instagram Photos Without You Noticing,” Cade Metz, Wired, June 26, 2014.
  3. Facebook Can Now Collect and Share More of Your Data than Ever Before,” Chris Smith, BGR, February 2, 2015.
  4. Instagram Ads Use Facebook Targeting Data,” Gabrielle Zigi, Firebrand Group, December 10, 2014.
  5. Facebook Q1 2015 Earnings Transcript.
  6. Frequency of Social Media Use,” Pew Research Center, January 9, 2015.
  7. Instagram Business Success Story, Instagram Blog.

Author: Paul Melcher

Paul Melcher is the founder of Kaptur. He is an entrepreneur, advisor, consultant with a strong background in licensing, copyright, sales, marketing and technology with more than 20 years experience in developing world-renowned photo based companies with two successful exits. Named one of the “100 most influential people in photography” by American Photo magazine.

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