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Instagram's move offers snapshot of social media advertising landscape

Facebook has tightened its commercial focus since its IPO in May this year, so the announcement that its photo-sharing site Instagram will begin trialling advertising with US users was surely inevitable, even if it did cause uproar among its die-hard artistic community.


There has been an increasing emphasis on social-led advertising at the company, with Facebook most recently announcing the imminent introduction of video ad units on its mobile app platform, aimed at further monetising its mobile audience. The arrival of advertising on the Instagram platform will surely support Facebook in making greater strides in mobile display. eMarketer estimates that advertisers will spend $9.52 billion on social network ads worldwide in 2013 (about 8.1% of their overall digital ad budgets), with spending on mobile ads increasing by 89% globally.


Instagram’s news is just the latest in a shift towards more commercial models within social media as a whole, and at the heart of this shift is the serving of more targeted, highly relevant advertisements. Pinterest is just starting to display sponsored posts based on searches carried out on the site, while LinkedIn delivers ads based on members’ job titles, industry and seniority, and Spotify delivers ads based on members’ demographic, location and favourite music genres. Instagram will, of course, tap into Facebook’s considerable targeting know-how, serving ads based on users’ Facebook profile information and ‘likes’, while Instagram users who don’t use Facebook will be served ads corresponding to their previous Insta-likes.


While the business case makes theoretical sense, ensuring that Instagram’s sizeable user base – it attracts an average of 150 million active users each month – is not alienated is key to the model’s success. Tellingly, Instagram has taken a softly, softly approach, perhaps even more so after the fallout from its change in ‘Terms and Conditions’ in January 2013, when its number of daily users was alleged to have dropped by half in just a month. Instagram denied the claims but admitted that it had received lots of ‘concerns’ from users as a result, mostly relating to advertising. The social media platform promptly reverted to its original T&Cs regarding advertising, and in his blog, Instagram co-founder Kevin Systrom wrote, “Going forward, rather than obtain permission from you to introduce possible advertising products we have not yet developed, we are going to take the time to complete our plans, and then come back to our users and explain how we would like for our advertising business to work.”


That time is now, and the company will begin serving advertising in the form of photos (and, eventually, videos) which will appear marked with a ‘sponsored’ label in a user’s feed. Users will be able to tap the button below the ad to indicate when they are not interested in the product or service being advertised, or provide feedback on why they don’t like the ad. The emphasis, in keeping with Instagram’s brand values, will be on “creative and engaging ads”, putting the onus on brands to develop fittingly aesthetic content if they are to gain traction with this audience. Many brands have already invested in building communities on Instagram over the last year and, remarkably, recent statistics show that brands already account for 40% of the 1000 most shared videos on Instagram, suggesting there is clearly an opportunity to be had.


Getting the balance right between organic and sponsored content will be Instagram’s main challenge, with many users wary about the way that ads have, arguably, become more and more prevalent on Facebook’s newsfeed. It is also unclear whether Instagram users will have the option to opt out of seeing ads, and anecdotal evidence would suggest that many are perhaps willing to pay a fee to ensure their experience remains uncontaminated by harsh commercial realities. Giving Instagram members the chance to ‘dislike’ an ad or share their feedback might not be enough of a sweetener for some to continue using the platform.


If Instagram gets it right, testing the water with brands who already understand its culture, this move presents a good opportunity for marketers to reach a large and engaged audience, particularly if the ads allow users to click through to make purchases or access further brand content. That said, the creative bar will be set sufficiently high to appease - and appeal to - Instagram junkies, meaning advertisers that don’t create beautiful content will risk damaging their brand. And with the precise nature of users’ lovingly curated and highly personal feeds, the emphasis will need to be on both relevance and style to resonate with this audience.

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