Kevin Systrom Drops A Few Hints About Instagram’s Business Model

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When Instagram co-founder Kevin Systrom spoke today at Federated Media’s Signal conference, there wasn’t much in the way of new info — but the fact that Systrom was at the conference, and the angle he took, suggests that the company is starting to think a little more seriously about its business model.

Systrom began his talk by reviewing some of the user numbers that Instagram has already shared — it has more than 27 million users. Perhaps even more impressive is the fact that if someone opens Instagram, they’re likely to open it eight more times that day. That reach and that engagement should already be pretty appealing to advertisers, especially when paired with Instagram’s focus.

“Our atomic unit of communication on Instagram is an image,” Systrom says. “Advertisers all around the world speak in images.”

For that reason, Systrom says that Instagram may be “the next big opportunity in display advertising.” And even though the app doesn’t have an ad program yet, he highlighted three ways that brands are already using it. First, they can promote products. Burberry, for example, uses Instagram to share photos from its fashion show and to repost its ads, usually with a filter.

“What’s really cool about this is, it doesn’t feel like advertising,” Systrom said. “When you open Instagram, it feels like entertainment.”

Second, events can use Instagram as live coverage and publicity, as both the Grammys and Sundance have done. Third, brands can organize Instagram-specific campaigns. Tiffany asked users to share love-themed photos, which it then pulled onto its own website using the Instagram API. Warby Parker took an “instawalk” with its fans, and throughout the walk, people were posting photos with Warby Parker glasses.

As Systrom was walking off the stage, event host John Battelle pointed out that even though those examples sound great, Instagram isn’t making any money from them. Systrom said this is “the prototypical example of every new social network.” He declined to say when Instagram might rolling out a paid ad model, but he said the big theme will be “experimentation” to see which premium services advertisers are willing to pay for. The features might, for example, involve improved distribution (perhaps a promoted photo or campaign) or something that makes a photo more “actionable”.