Is Instagram the Next Big Advertising Space?

Josh WolfordAdvertising

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In November of 2013, Instagram debuted its first-ever ad. Featuring a gold watch and the caption "Pampered in Paris", the photo from Michael Kors marked Instagram's entrance into the big game. Instagram had held out for a while, maintaining its status as an ad-free zone for years – but that was until Facebook gobbled it up for a billion dollars. Facebook wasn't going to sit around and let Instagram not make any money for too long.

Instagram is starting slow with advertising. That's what the company is saying, literally. "We’re starting slow with advertising to make sure we take time to get the experience right for our ad partners and the Instagram community," says Instagram in response to the question How do I advertise? Considering the history the company has when it comes to ad products and public freakouts, this is probably a wise decision.

What do you think about ads on Instagram? Let us know in the comments.

How slow? Well, Instagram started out with only a handful of big-name partners like Ben & Jerry’s, Burberry, Levi’s, Macy’s, PayPal, and Lexus. Since then, they've taken on a handful of others like Taco Bell and Hollister – but for the most part Instagram's ad product is a gated community. It'll let everyone else in on the fun at some point – but as of now there's no timetable for that.

Whenever that happens, however, Instagram's ad product will likely explode. It's not out of the realm of possibility that when ramped up to full scale, Facebook could have a $100 million-per-quarter monster on its hands with Instagram.

All signs point to Instagram getting incredibly serious about ads. This week, the company unveiled its first-ever video ads – which have been in the works for months. These 15-second video ads will autoplay in users' feeds and will begin popping up immediately. Like the original photo ads, Instagram's video ads are being handled with kid gloves. The company has only five partners so far – Disney, Activision, Lancome, Banana Republic and CW.

While the debut of video ads is clearly the biggest step forward for their total ad product, Instagram has been making smaller steps over the past few months. Last month, we learned that the company is preparing to jump across the pond with its ad product, and before that it debuted a shiny new analytics suite for brands.

And on the personnel front, Instagram recently made a big hire – or more aptly put, a resource shift. In August, Instagram created a new position – the Global Head of Business and Brand Development – and filled it with Facebook Regional Director James Quarles.

Nobody knows when Instagram is going to pull the trigger and open this ad product wide – but you have to imagine that with these moves, it's at least on the horizon. That is unless Facebook is waiting for "a rainy day, when growth on the Facebook platform has slowed and the company isn’t raking in the revenue as easily as it has recently," as suggested by GigaOm's Carmel DeAmicis.

Either way, that time is going to come. And when it comes, will marketers bottleneck?

If you look at some of the early engagement figures – they sure as hell should.

Check out these figures from Q2, which AdWeek obtained from social media shop Shareablee:

- Facebook garnered 2.5 million brand posts, a year-over-growth of 22 percent.
- Instagram had 493,000 of such posts, a 49 percent year-over-year jump.
- Facebook accrued 6 billion actions (likes, comments or shares).
- Instagram totaled 3.4 billion actions (likes, comments).
- Facebook had 2,396 actions per post.
- Instagram racked up 6,932 actions per post.

The growth rate of brand posts is obviously swayed toward Instagram, considering it's a newer platform. But look at those average actions per post. In terms of engagement, brands are getting much more bang for their buck on the visually-dominated Instagram landscape.

And evidence for individual brands seem to mimic this trend. Taco Bell, for instance, recently garnered 400 percent more fan engagement on promoted posts as opposed to organic posts. The company ran a month-long ad campaign on Instagram as saw its follower count increase by 45 percent.

Then there's the Forrester study of over three million users interactions that found Instagram engagement blew other social networks' engagement out of the water. From MarketWatch:

But one social network “blew the others away” when it comes to engagement, the report said. Brand ads posted on Instagram delivered 58 times more engagement per follower than Facebook, and 120 times more engagement per follower than Twitter.

Of course, there's this to consider:

“While Instagram has more than 200 million monthly active users, it attracts fewer people than Facebook and Twitter do,” the report said. “Plus fewer marketers use Instagram, and those that do post less frequently. The result? Brands’ Instagram posts don’t have to fight through as much clutter to reach their followers.

“As users and marketers flock to Instagram, clutter will increase and Instagram will likely begin filtering out brands’ posts in the name of relevance. Marketers must use Instagram now, before it changes the rules – and they must be ready to move on to another social site when Instagram’s phenomenal engagement rates disappear.”

It seems that Instagram's primary job when its ad product goes wide will be to make sure it's careful not to clutter.

At least for now, Instagram's pretty careful. Instagram CEO Kevin Systrom has said that he's "looking at every ad" to make sure it will be a good fit in the Instagram universe.

Of course, you can't expect that to continue when the promoted posts start pouring in at a fast clip – but Instagram would be wise to keep at least some element of that attention to detail.

From personal experience, I can say that Instagram's ads are some of the least intrusive and artfully constructed around. Much of that has to do with the visual nature of the medium. What do you think? Is Instagram the next frontier for big ad money? Let us know in the comments.

Josh Wolford

Josh Wolford is a writer for WebProNews. He likes beer, Japanese food, and movies that make him feel weird afterward. Mostly beer.

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