I have to confess: I’m addicted to Instagram.
It is one of those apps that I constantly find myself mindlessly opening and scrolling through.
I also find myself posting a lot more on Instagram than Snapchat these days, specially the raps I make daily.
Today, I wanted to explore how does Instagram make money, their revenue plan and a lot of other exciting stuff.
Instagram, owned by Facebook, Inc., is a free social networking application initially intended for sharing photos and eventually, videos. It was developed in San Francisco, California in 2010 by Kevin Systrom and Mike Krieger.
During its initial launch, Instagram was an exclusive iOS application. People with Android devices were able to download the app by April 2012, followed by a web interface in November 2012. Instagram became available for devices running on the Windows operating system in 2016.
Users can apply filters, organize with tags, provide location information, and share content on social networking sites like Twitter, Tumblr, and Facebook. Initially, the service only allowed users to frame content in a square (1:1) aspect ratio, but this got eased in 2015.
Later on, Instagram also added a messaging feature (the famous DMs), allowed users to include several photos or videos in one post, and recently included “Instagram Stories,” akin to Snapchat Stories, its primary competitor.
History and Funding Rounds
Since its launch in 2010, Instagram rapidly gained popularity. Two other funding rounds happened after the founders closed a seed round amounting to approximately $500,000 from Baseline Ventures and Andreessen Horowitz and before its acquisition by Facebook:
The company raised $7 million led by Benchmark Capital as well as several other investors which included Twitter’s own Jack Dorsey
Just before Facebook acquired it, Instagram closed a $50-million investment with Sequoia Capital, Greylock, Josh Kushner of Thrive Capital, as well as Benchmark, at a $500M valuation. In April of that same year, Facebook acquired Instagram for about $1 billion in cash and stock.
So now, let’s get to the money $$$…
Instagram’s Holy Grail: Its Advertising Business
The service’s monetization efforts began in October 2013 when it announced that US users would start to see video and image ads appearing in between photos in the news feed. During the early stages, there weren’t a lot of brands allowed to advertise.
In November 2013, image ads officially began appearing in users’ feeds, while video advertisements came in on October 2014.
By March 2015, Instagram announced that it would allow advertisers to purchase “carousel ads.”
This feature enables brands to post up to five photos that any user may swipe through, and with options at the end for more content or visit the website of the brand.
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Given the initial success of carousel ads, Instagram began allowing advertisers to post videos in carousel ads in 2016. During that same year, the service announced the launch of various new tools intended for a business account, which now includes new business profiles, insights, and analytics, as well as the capability to immediately turn your post directly into ads from the Instagram app.
At that time, the service had about 200,000 advertisers on the platform. The number of active advertisers increased to 500,000 in September 2016, and to a million in March 2017. In just six months since then, Instagram’s roster of advertisers rose to two million.
It is estimated that Instagram contributed between $8B-$9B to Facebook’s revenue in 2018, up 70% from last year. Reports mentioned that Instagram makes up around 28.2% of the mobile ad revenue of Facebook.
How Instagram Helps Facebook Dominate The Social Media Space
Instagram is such a powerful platform that carries a lot of value for brands, making it a very lucrative investment. With people coming to Instagram each day to share their lives, they continue to spend more time on a platform that produces and explores content, particularly mobile video.
Time spent watching video through the service increased to more than 80% year over year, while the total number of produced videos each day also increased to 4x from the previous year.
While Instagram benefits from its association with Facebook as advertisers get to use similar tools when buying ads, the service is also a common advertising option because of its strictly images platform given that social media marketers tend to spend a lot of time coming up with images than other types of content.
Competing With Snapchat
In August 2018, a report was released indicating that Snapchat’s daily numbers shrunk approximately 1.5% to 188 million from 191 million during the previous quarter, with Instagram implementing similar features. At that time, Snapchat lost about 3 million of its daily active users as it lost ground in the second quarter of 2018 to Instagram.
Instagram launched the Stories feature back in 2016 to compete directly with Snapchat. This feature, as well as Snapchat’s, allows users to post quick videos that are only viewable for a certain period (24 hours).
The revenue of Snapchat was high at 44% to about $262 million from $182 million during the same period last year, and it trimmed net losses by approximately 20% to $353 million in the second quarter of 2018 versus its net loss in Q2 2017 of about $443 million.
Snapchat is also blaming the backlash it received when it redesigned its app, prompting about 1.2 million users to petition for the company to revert to its previous layout. It was explained by Evan Spiegel, the company’s co-founder and chief executive, that Snapchat was aiming to separate “social” from “media” when it did the revamp.
In the recent version, users will see stories, snaps, and messages from their friends are grouped on the page to the left of the main camera’s screen, whereas stories from various publishers are available on a new page called Discover, located at the right side of the camera screen.
As for Instagram’s numbers, they remain very strong, dwarfing the stagnant growth rates of Snapchat. In June 2018, the service announced that it reached a billion monthly active users, after it passed 800 million back in September 2017, with about 500 million daily users.
Its daily user count is said to be growing closer to 5% per quarter, versus Snapchat’s which increased about 2.13% during the first quarter of 2018, while Facebook’s monthly count grew by about 3.14% to reach approximately 2.196 billion.
Hitting a billion user achievement may also put pressure on Instagram to carry its weight within the Facebook family to rake in more revenue.
Here’s How YOU Can Make Money On Instagram
If by now you’re thinking about the number of followers you’ll need to earn from Instagram, the precise answer is not that many. However, a longer answer depends on several factors which include:
- The niche you are in and how easy can you directly tie that to a particular product category like food, fitness, fashion, or beauty. All these come with popular hashtags
- How engaged your current followers are
- The revenue channels you want to explore
While a lot of notable Instagrammers earn thousands for each of their posts on the platform, even those people who have smaller but have more engaged following will have the potential to start making money on Instagram.
Once you’ve figured out your niche, potential products, and the engagement of your followers, the most common approach to monetize Instagram is by working with different brands on sponsored posts.
You can also create your own brand of products and sell those to your followers. For instance, this is what I did with my account @youngslacker and the portable charger Flux Chargers.
And no, you don’t need to get verified on IG to start making money.
In the last couple of years, the social media platform Instagram has gone a long way from being the brainchild of its founders to an app used by billions of people (1 Billion users in 2018) which is changing not only the purpose of photos and videos but also as to how people put up content.
While Facebook doesn’t release the specific revenue amount brought in by Instagram, that number is expected to be $8 for 2018 and growing at about 15% each year.
If you liked this post, share it with a fellow IG addict that might be curious about how Instagram makes it money.
Here are how other social media giants make money:
- Snapchat’s monetization strategy: Can they compete with Instagram?
- Facebook makes OVER 98% from one source alone! Read this to find out what it is
- Whatsapp’s path to revenue and why they are worth $19B
- Have you heard of Discord?
Also, don’t forget to add me on The ‘Gram @YoungSlacker.
Instagram has a huge opportunity to earn from it. Instagram ad management is easy…