by Marlon Emmanuel Mcleod
Instagram is a social media platform that was created in 2010 and was acquired by Facebook in 2012. It has over 500 million active users and continues to grow. But how does Instagram make money? And what are its sources of revenue? In this blog post, we will discuss how Instagram makes money and its sources of revenue. We will also discuss how Facebook benefits from Instagram. We will also examine how these methods have changed over time. By understanding how Instagram makes money, you can better understand the business model of this popular social media platform.
Instagram’s growth path to 1 billion+ monthly active users is intertwined with the gradual loss of founders’ freedom and the rise of their ability to print money. This blog will show how the product developed just from silver coins and grew after being acquired and how its revenue streams went beyond conventional digital advertising. However, let’s first establish context by going over Instagram’s genesis tale.
What is Instagram
Facebook owns Instagram, a social networking site for sharing images and videos. Through the platform’s mobile application, users can take, edit, and post photographs and videos, follow other users, and engage in user-to-user communication via the like, comment, and chat features.
Both individuals and businesses use the platform to engage with their audiences. In twenty-first-century pop culture, where popular users are known as influencers, the corporation has played a crucial role for users.
For businesses, the platform serves as a crucial marketing tool for increasing brand recognition, engaging with clients, and even making sales.
One billion users log into Instagram at least once a month, with 500 million considered daily active users. Of those who use the app regularly, 34% are aged 25 to 34, and 31% fall in the 18 to 24 age bracket. The genders are fairly evenly split among users, with 51.2% female and 48.8% male globally. Regarding specific geographical areas using Instagram, North America dominates usage statistics, with 75% of all 18-24-year olds in the United States reported as regular app users.
How Instagram Began and Changed with time
Ironically, the app wasn’t called Instagram or primarily focused on sharing photographs with friends when Kevin Systrom first released it in 2010. Location check-ins were already becoming popular due to Foursquare’s launch and success at the time. So Systrom created a similar program called Burbn and added a few more functions. Systrom also secured a $500,000 seed investment from Baseline Ventures and Andreessen Horowitz to continue working on the app for a few months.
Three months later, Burbn was not gaining the traction the creators had anticipated, so they returned to the drawing board. The two chose to remove features from the app rather than add more.
In an interview with Tim Ferris, Kevin Systrom described how they made the change, saying, “We got at the idea for Instagram by taking features away from Burbn, not by changing it entirely. Several Burbn features include the ability to check in at a location and the ability to upload a photo documenting your activities there.
However, it was not the removal of all other features and restricting user posting to images that caused Instagram to expand rapidly. Unexpectedly, one of Systrom’s talks with his wife provided the information that helped Instagram expand. Filters were absent from the original version of Instagram. People seem to forget that the filters were the only thing that made Instagram functional early on. He had the idea for filters while out for a stroll with his wife. They had a brief getaway. I had been working on Burbn for quite some time, and I was worn out. His wife complained about how her images weren’t fantastic, which gave the idea of filters, and he created the first filter, X-Pro II.
Back then, cell phones lacked high-resolution cameras. However, users could improve low-quality photos with filters, which caused Instagram to reach 15 million users by the end of 2011. The number of monthly active users was more than 50 million by the end of 2012.
After Facebook acquired Instagram in April 2012, the number of monthly active users on Instagram continued to rise. By June 2016, there were more than 500 million active Instagram users. The Instagram founders left around the end of 2018 due to irreconcilable conflicts and a progressive loss of authority after Instagram reached 1 billion monthly active users in June 2018.
According to a report by Verge, Facebook’s top executives began to feel insecure due to Instagram’s explosive growth, fueled by growth strategies like highlighting Instagram as the source for media shared on Facebook via Instagram and recommending followers to Instagram users based on Facebook friends. So much so that Mark Zuckerberg informed Kevin Systrom that he would remove all of those supports to safeguard the well-being of the Facebook app, which most likely served as the last straw and ultimately resulted in the resignation of both Instagram founders.
However, before they left, the founders oversaw the introduction of fresh features like IGTV, Instagram Direct messaging, Boomerangs, sorted feed, and video support. Following their departure, two noteworthy features emerged: Instagram Shopping & Reels.
Instagram Business Model
The business plan for Instagram is distinct and changing. The business strategy has remained consistent since its launch in 2010: it is a smartphone application that allows users to share photos for free. However, the algorithm it utilizes to monetize users’ attention has changed.
Instagram users must set up a profile to connect with others, just as on Facebook. After logging in, the user can access services like photo and video upload, photo and video filters, followers, geotagging, self-disappearing tales, live stories, IGTV, etc.
Users spend an average of 26 minutes each day on the Instagram app, according to eMarketer.And 91% of them follow at least one of their interests on Instagram. Because of this, the platform is the ideal place for businesses to advertise and sell their goods, which is how Instagram generates revenue.
How Instagram Makes its Money
Instagram combines influencing and visual storytelling. About 70% of those who enjoy shopping use Instagram to find new products. Most people even use the platform as a result of FOMO. Because of this, brands and users both adore it.
66% of respondents to a recent Ipsos survey indicated they use Instagram because it allows them to engage with brands. The platform effectively makes money from this interaction by
Instagram earns the most money from advertisements related to shopping. It is anticipated that by 2021, Instagram will account for 40% of Facebook’s ad revenue. Business of Apps claims Instagram feed advertising typically costs $0.60 per click (CPC), while Instagram Stories ads cost $0.50.Instagram feed advertisements cost $1.65 per mille (CPM), whereas Stories ads cost about $0.90.
Over 2 million advertisers advertise on Instagram each month, according to a recent blog post by Instagram itself.
Instagram posts are a great way to get user attention because they appear between people’s posts in the feed. They are also non-intrusive, meaning users can scroll past them if they are not interested. Instagram’s oldest and main revenue source is digital advertising. Every piece of real estate that Instagram introduces on the platform will eventually include advertisements. As of this writing, Instagram feels free to display advertisements across the feed, stories, Explore Tab, IGTV, and Reels. The advertisements are available in various formats, including photos, videos, carousels, collections, and shopping ads.
Instagram receives small coin money payments from advertisers for its image adverts. These advertisements, which show up in the user’s feed, may connect to the brand’s website or Instagram account. These advertisements are very targetable. For instance, a person who frequently posts Instagram photos or an Instagram post of their pet would get a visual ad for dog toys.
Instagram users have the option to share stories and view those shared by people they follow. Instagram distributes adverts to companies in between user-shared stories. The Instagram story can be a single image, a photo carousel, or a movie, just like the tales themselves. Brands can link their story adverts to their company’s website so potential customers can purchase. A story advertisement might be a toy promotion shown to a parent who uses Instagram to post pictures of their children.
Additionally, businesses can employ video advertising to market to Instagram users. Similar to photo advertising in appearance, video ads appear in a user’s feed, but Instagram costs advertisers extra for them because they are videos. These advertisements have a hyperlink to the business’s Instagram account or website. Video commercials are more appealing to advertisers and more expensive since they might convert better because they are more likely to capture a customer’s attention and communicate the value of their products. A video advertisement can demonstrate how a product will help consumers save time in the kitchen.
Additionally, Instagram gives its marketer’s carousel ads. Like video and photo advertising, carousel ads appear in a user’s feed; however, the viewer can swipe to watch different images or videos. These advertisements also hyperlink to a business’s website or Instagram account. For businesses with a broad range of products, carousel advertisements are fantastic. A clothing firm that wishes to present viewers with several distinct style alternatives is an example of a business that might employ carousel advertisements.
Ads using branded content
Instagram provides brands the opportunity to collaborate with Instagram producers through sponsored content adverts. By presenting them with creators with a comparable audience or who have already connected with their brand’s page, they assist businesses in finding new creators to collaborate with. Once a partnership is established, businesses can use branded content ads to promote the content.
Instagram offers businesses the chance to sell things directly on Instagram via a service called Checkout on Instagram, which is presented exclusively accessible to US firms. By assessing transaction fees on these sales, Instagram generates revenue. They normally charge 5% per shipment or, if shipments total less than $8.00, a flat price of $0.40.
A vertical long video platform called IGTV relies on user-generated material. It resembles YouTube or TikTok, although it is positioned differently than both.
However, Instagram monetizes this platform similarly to YouTube by using advertisements and paying creators a portion of the money.
2. Instagram Shopping
Instagram originally introduced Shoppable posts at the tail end of 2016, allowing businesses to tag products in posts just the way users tag friends. Shoppable posts reduced friction in the purchasing process by assisting consumers in learning about and evaluating the purchase cycle. However, they were routed to the brand’s website to complete the transaction. Instagram would receive a portion of the sale in exchange for less friction and higher conversions, much like an affiliate.
Instagram expanded the functionality of Shoppable posts in March 2019 by enabling users to complete their purchases directly from the Instagram app, thereby decreasing the friction associated with the purchasing process. Instagram charges vendors a fee, just like the Shoppable posts feature.
3. Creators Tool
The Instagram Creator’s Toolkit is a set of resources designed to assist content creators in developing high-quality content, expanding their reach, and increasing their engagement. It also provides access to exclusive features, such as insights and analytics. The Instagram Creator’s Toolkit is available to all content creators, not just those paid by businesses.
Instagram has been introducing features geared toward creators to assist them in monetizing Instagram and building direct connections with fans. According to a report by Verge, Instagram aims to pay them for advertisements on Reels and distributes 55% of the money made from ads broadcast on IGTV.
In addition to sharing ad revenue, Instagram allows creators to earn money via badges, which fans can use to support a creator during a live broadcast. During a live stream, individuals who buy badges get a heart icon next to their name in the comments. During the live session, queries posed by users who have purchased badges are emphasized. Instagram doesn’t cut off the money earned from badge sales; creators get all of it.
Can you earn Fiat money or paper money by working and using Instagram?
Users can earn paper currency by collaborating with brands, selling products, or using features like badges and IGTV ads on their Instagram accounts. However, Instagram does not currently offer a way to directly convert Instagram activity into a money supply that one can deposit in the federal reserve system.
Instagram is a popular social media platform that can be used to generate revenue in several ways. Businesses can use Instagram to sell products, promote branded content, or run ads. Content creators can also earn commodity money by collaborating with brands, selling products, or using features like badges and IGTV ads. While Instagram does not currently offer a way to directly convert Instagram activity into fiat currency, users can still earn fiat currencies by using the platform using legal tender with brands and directly depositing into their central bank.Follow YouTube Channel
by Marlon Emmanuel Mcleod