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.
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
- “Instagram Launches Ads with Sponsored Post from Michael Kors,” Chris Welch, The Verge, November 1, 2013.
- “How Facebook Moved 20 Billion Instagram Photos Without You Noticing,” Cade Metz, Wired, June 26, 2014.
- “Facebook Can Now Collect and Share More of Your Data than Ever Before,” Chris Smith, BGR, February 2, 2015.
- “Instagram Ads Use Facebook Targeting Data,” Gabrielle Zigi, Firebrand Group, December 10, 2014.
- Facebook Q1 2015 Earnings Transcript.
- “Frequency of Social Media Use,” Pew Research Center, January 9, 2015.
- Instagram Business Success Story, Instagram Blog.
Author: Paul Melcher
Paul Melcher is the founder of Kaptur and Managing Director of Melcher System, a consultancy for visual technology firms. He is an entrepreneur, advisor, and consultant with a rich background in visual tech, content licensing, business strategy, and technology with more than 20 years experience in developing world-renowned photo-based companies with already two successful exits.