Instagram is done experimenting and is ready to ramp up ad revenue. It’s making three big changes today to attract marketing dollars from around the world and other ad mediums. Finally, Instagram will make back the money Facebook spent buying it.
First, today Instagram ads become officially available in 30 more countries including Mexico, India and South Korea, and will be on sale globally by the end of September. After users in core markets proved loyal despite having ads injected in their feeds, all 300 million people who use Instagram will now see ads. And instead of only working with big brands, Instagram is opening up ads to businesses of all sizes.
Second, Instagram is now courting television and online advertisers with more standardized formats and buying options. Instagram will allow advertisers to run 30-second video ads, rather than just 15 second ones, and use landscape dimensions instead of just squares. Landscape and portrait mode came to users last month, though Instagram’s James Quarles told me it wouldn’t be technically feasible to expand the video length limit to 30 seconds for non-advertisers. This means businesses can easily port their television commercials into Instagram ads.
Instagram is also debuting a new buying option called Marquee that lets advertisers “own a moment” and reach a huge swath of the user base quickly. This is ideal for big product launches or movie releases where brands want big first-day sales. FOX will run the first marquee for its new TV shows, including Scream Queens, seen above.
And third, Instagram is luring advertisers from a wider array of industries to its ads with improved calls to action. These include travel, entertainment, ecommerce, and retail. After testing “Shop Now”, “Install Now”, “Sign Up”, and “Learn More” options, these direct response formats that can link outside of Instagram will open to all advertisers.
Commerce and app install ads will make the photo network more valuable to merchants and developers who want an immediate return on investment. All these formats and placements will now be available through Facebook’s self-serve ad interface, Ads API, and Power Editor, which allow extremely granular interest and demographic targeting.
To prove the ads work, Instagram cites some examples:
- Gilt Group’s campaign drove an 85% increase in app installs
- Furniture retailer Made.com saw a 10% increase in order value versus its benchmark
- Game developer Kabam was able to acquire users who played longer and spent more
Facebook’s Acquisition Comes To Fruition
Really, this was the moment Facebook was imagining when it acquired Instagram. Of course it wanted to continue connecting people through photos the way it did with its social network. But on the business side, Instagram held the promise of applying Facebook’s advertising technology and connections with brands to another massive audience. It took three and a half years, but that moment has finally arrived.
Instagram’s Quarles tells me “it would take us years to build that advertising stack on our own.”
It comes down to scale.
Advertisers, and in turn, investors, want scale. Facebook already has a ton of it with its nearly 1.5 billion users. Instagram adds another 300 million. This is the scale Wall Street desperately wants Twitter to achieve.
Now, when an advertiser wants to reach a huge audience, all they need is to buy through Facebook and they can push an ad to people on both Facebook and Instagram. With that scale comes efficiencies in sales and backend infrastructure. Each extra dollar earned costs Facebook less.
Now all Instagram has to do is not show so many ads that users get annoyed, change so much that they feel lost, or stay so stagnant that the app gets stale. As long as Instagram doesn’t lose its cool, it will become a massive money-making machine worthy of mention on Facebook’s earnings calls.
Instagram favored growth for its first five years. Now it’s all grown up and ready to be a bread-winner.