When it switched on its Ads API, Instagram opened up its advertising platform by enabling advertisers to manage campaigns directly without having to call a sales rep and drop the $50,000 minimum spend. Instagram ads are no longer an exceptional media buy; the social network has taken its place alongside Facebook, Twitter and Google as one of the major advertising platforms.
This is a natural next step in the integration of Facebook and Instagram. Facebook will provide Instagram with targeting capabilities and an interface that would have taken the company years to develop alone.
This move will open Instagram up to many more advertisers, driving more innovation around mobile formats and square images. We may see a drop in quality of Instagram ads initially as marketers look to reuse creative designed for other platforms, but gradually this will fade as the best performing ads will be those designed to exploit Instagram’s natural strengths.
Interestingly, Instagram ads are more complex than the content that surrounds them. While users are restricted to a single, square image or video, advertisers can deliver carousels of several images and include "shop now" buttons and links. This will help brands’ messages to stand out and make them more playful, though the platform is likely to be cautious about developing too much functionality too quickly for fear of alienating users.
So Instagram stands ready to be the next big advertising platform. Analysts at Bank of America Merrill Lynch forecast that Instagram could deliver revenues of $1 billion as soon as 2017.
However, Instagram is no Facebook. It might be able to share demographic profiling data with its giant parent but it lacks two of Facebook’s principal advantages.
First, there is no Instagram news feed. Users see images from people and brands they follow simply in chronological order. Many brands, particularly in fashion and luxury, have built up very effective, highly engaged followings organically. Whereas Facebook can restrict the visibility of organic postings from branded pages in fans’ news feeds, Instagram has no such secret sauce, unless it radically changes how the product works. Facebook effectively dialled down the impact of brands’ organic activity on its platform, forcing them to buy advertising in order to remain visible. Like Twitter, Instagram will rely on the carrot of enhanced functionality for advertisers to drive uptake of its advertising platform. There is no stick.
Also like Twitter, Instagram is operating at a much smaller scale than Facebook. Both Instagram and Twitter have roughly 300 million monthly users, just shy of five times smaller than Facebook’s whopping 1.49 billion. This smaller audience, combined with what will become a necessity to design bespoke creative for Instagram, may restrict uptake of the platform by advertisers.
Instagram has taken a big step towards becoming a significant advertising player and has many of the ingredients it will need – loyal audiences, long dwell times, engaging formats. However, the social network faces a number of major challenges if it is to reap rewards of the same order of magnitude as Facebook.
Ilicco Elia is head of mobile at DigitasLBi
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