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The future of advertising on Instagram

Author's avatar By Robert Allen 25 Aug, 2015
Essential Essential topic

All you need to know about the upcoming advertising possibilities on the fastest growing social network.

August update:

Instagram officially switched on its ads API earlier this month. This constitutes a big leap, since marketers can now buy ads on Instagram in an automated fashion for the first time. Previously, to buy ads on Instagram you had to contact an Instagram sales rep directly, and this was only available in certain locations and for companies with large budgets. The release of this API by Instagram has serious ramifications for marketers.

Until the API became available it was very hard to track the effectiveness of Instagram ads. But now  brands will gain the ability to track their Instagram marketing activity. Interaction and the effectives of the posts can now be measured from desktops via 3rd party applications plugging into the API.

The release of the ads API will open up a huge array of opportunities and allow Instagram to grow rapidly now that it has generated a highly successful revenue stream. Analysis at Bank of America Merrill Lynch predicted it's revenues could increase almost tenfold over the next two years, to reach near $1 billion in 2017, and continue to skyrocket, to over $3.8 billion by 2020. This is huge growth that would see Instagram over taking Twitter and rivalling Google for mobile ad revenue.

Looking to the future

Instagram overtook Twitter late last year for number of monthly active users, within the next few years it will almost certainly overtake it in revenue. It is particularly popular with the millennial generation; over half of 18-29 year olds in the US use the platform, and is slightly more popular with women than men. It’s success with younger people means it is likely to grow in popularity and importance as an ad platform as its user base ages and starts to want to purchase cars, houses and all the trappings of modern life. The release of an API for ads by Instagram is, therefore, a big moment for advertisers everywhere. Anyone looking to advertise to a youngish demographic should certainly give Instagram ads a serious thought.

Instagram is among the fastest growing social networks in the world, and for the US market it is the single fastest growing network by total number of new users.

Instagram logo

For those wanting to target a younger audience, marketing on Instagram offers a huge opportunity: 53 percent of 18-29-year-olds in the US use the platform.

It is thus clear that especially for B2C brands, Instagram represents a key growth market for attracting customers, and those who fail to use it effectively risk missing out to competitors using the platform well.

Advertising on Instagram

In its infancy, there was no ability to advertise on Instagram, so the best brands could do was set up their own pages and try to build a following organically. However, the platform started allowing certain advertisers to use the platform a year and a half ago. These were major brands that created high-quality ads, and the results were pretty impressive. Ad recall from the sponsored Instagram posts was almost three times higher than the norm for online advertising. However, this should be taken with a pinch of salt as the platform has previously been ad-free, so it is not clear if these engagement rates will continue

A study by Instagram itself into the effectiveness of its ads (so do be a little sceptical, they’d want to make their ads seem effective after all) showed that of 4 campaigns reviewed there was a 32-point incremental lift in ad recall per campaign compared to a control group. There also was a 10 percent lift in brand message awareness. Statistics on ROI are not available because the campaigns were delivering board reach advertising to increase awareness. There was no option to click through to buy products or learn more.

Instagram ads examples

New features for advertisers

Instagram announced a month ago that it would be increasing its ad offering to give advertisers more options. The different ad formats include letting people sign up, buy a product or download an app directly from an ad. Instagram has been relatively vague on the details, but these will be revealed in the coming months as the features are released.

Enhanced ad targeting

Instagram knows that it users won’t want to be bombarded with irrelevant ads. It also knows that advertisers want to only pay to put ads in front of people that are going to be interested in their products or services, so as to be able to get the best possible ROI.

Offering advertisers better-targeting options is a win-win scenario for all involved. The critical component to be able to target effectively is data. Does Instagram have the relevant data on age, gender, interests, location etc. that facilitates this kind of targeting? No. But it does know someone who does. As Facebook bought Instagram in 2012, it has access to the wealth of data that Facebook has on its users.

Instagram says this will mean advertisers will be able to target via demographics and interests data that has been gathered by Facebook.

How will Instagram ads be purchased?

Instagram's newly released Ads API means they can be bought through 3rd parties using the API. However so as to make it easier for businesses large and small to purchase ads on the platform, Instagram says that it wants to ‘leverage the best of Facebook’s infrastructure for buying, managing and measuring the success of ads on Instagram’. So expect changes coming soon, possibly allowing Instagram ads to be purchased through Power Editor.

Can I advertise on Instagram now?

Yes! The ads API is now released, so you can buy ads on Instagram through 3rd parties using the API.

Auhtor's avatar

By Robert Allen

I was the Editor of Smart Insights between 2015-2017. I managed the blog and you will find blog articles on a range of subjects- Marketing Technology trends and latest tech developments are a regular focus, as well as exploring key marketing concepts. You can get in touch with me on Twitter and connect with me on LinkedIn. The new Editor is Carolanne Mangles.

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