While Instagram is still in the midst of a wider roll-out of advertising options on the platform, optimism for the potential of such options is rising among marketing and market analyst communities. In their first ever forecast for how much advertisers will spend on Instagram, eMarketer has predicted that the image-based social network will bring in $595 million in mobile ad revenue this year. What's more, by 2017, eMarketer expects Instagram to be generating $2.81 billion in mobile ad revenue, equating for more than 10% of parent company Facebook's overall ad income.
That's a pretty big jump, especially when you consider that in 2012, when Facebook sought approval for its takeover of the photo-sharing app, it's annual revenue was exactly $0 (with $2.7 million in losses, no less). Now, after overtaking Twitter in monthly active users, and on the precipice of cementing it's place as one of the "Big Three" players in the social media landscape, Zuckerberg's once criticized acquisition is looking like a stroke of genius.
The World's Fastest Growing Social Network
By current stats, Instagram is the fastest growing major social network in the world right now. A report by Pew Research earlier this year showed Instagram's active user base grew 9%, year-on-year in 2014, beating out Pinterest (7%), LinkedIn (6%) and Twitter (5%), while Facebook growth remained flat. Indeed, amidst growing speculation over the slowing popularity of Facebook, particularly among younger audiences, it's Instagram (and to a lesser degree Snapchat) that's seen the most benefit from user migrations. Add to this the fact that Instagram is adding in a whole new range of ad options, and that engagement levels on Instagram remain significantly higher than Facebook, and you can see why brands are extremely keen to maximize that audience attention, underlining the potential of advertising on the platform.
From eMarketer's report:
"We expect to see rapid growth in Instagram's ad revenues this year and throughout the forecast period-driven by high demand for the social network's new ad products, which will expand beyond branding to include direct response, the ability to buy ads via an API, and enhanced measurement and targeting features."
And while the new ad options are definitely intriguing, it's the addition of Facebook's advanced ad targeting features that are likely the most exciting element for businesses looking to reach their audience via Instagram.
Facebook's Custom Audiences are one of the key strengths of the platform's ad options. The ability to target audiences based on increasingly specific details and user actions - the type of minute, behavioural specifications that no other platform can come close to matching - is a hugely attractive draw for advertisers. One of the highlights of Facebook's ad targeting - and one that's likely to resonate with Instagram advertisers in particular - is "Lookalike Audiences", the ability to input an audience of your choosing, from e-mails or Facebook profiles, then have Facebook create a custom ad listing that mimics the traits and behaviors of those users. It's an increasingly intelligent targeting option, and given the lack of complex user data on Instagram - there's not a heap of info to be gleaned from a person's Instagram profile - the ability to target similarly interested Instagram users, based on their Facebook AND Instagram activity, will no doubt be a major winner with Instagram advertisers when rolled out.
Advanced targeting features like this are set to be made available to Instagram advertisers in the next few months, and those options play a big role in eMarketer's overall optimism about Instagram's growth potential.
"The rollout of new features over the next several months means that by the end of 2015, Instagram will have a host of new ad products for advertisers large and small. In particular, Instagram advertisers will be able to use a full slate of Facebook targeting tools, including the popular Custom Audiences feature. That will be a key drawing card"
eMarketer's forecast predicts that Instagram will make the vast majority of their revenue in the US market, with only 5% of overall ad revenue to come from outside the US this year. While that figure is set to grow (8% in 2016 and 15% in 2017), the US market is predicted to be the major contributor to Instagram's ongoing ad revenue growth for the foreseeable future.
According to eMarketer's figures, Instagram's monthly US user-base increased almost 60% in 2014 to 64.2 million people. By 2019, eMarketer predicts 111.6 million US consumers will be active on the platform. Instagram advertising is currently only available in seven international markets: Australia, Brazil, Canada, France, Germany, Japan and the UK.
In addition, eMarketer's researchers predict that the image-based network will have higher net mobile display ad revenues than both Google and Twitter by 2017.
The numbers underline, once again, that Instagram is one of the key networks on the rise in social circles, and one that all brands should be considering for future expansion. While it's not for everyone, and it's yet to be seen how audiences will respond to a wider influx of advertising, the numbers show that there's huge potential in Instagram, and significant audience reach capacity for those who use it well.
What's more, Instagram has the advanced benefit of lessons learned by Facebook in previous monetization efforts. Things like changes to organic reach and the rising amount of advertising in News Feeds have highlighted to Zuckerberg and Co what works, what audiences see as too much, and what will help them succeed in future revenue planning. Such lessons have already seen Facebook give more control back to users in terms of what they see in their News Feeds, a likely response to negative backlash from their many changes. Instagram can utilize these learnings - they're taking a very cautious approach to the rollout of ads and the gradual phasing in of increased monetization options. This is a smart play from the platform, and, as eMarketer sees it, they're likely to see major, long-term benefits as a result.