In an effort to boost ad revenue, Instagram is catering to brands with a new suite of tools, it announced on Tuesday. The three new “business tools” are aimed at helping businesses “stand out, get insights, and find new customers,” the company said. The tools will also help businesses learn more about you than they ever could before from Instagram.
The new tools were necessary, Instagram says, because “there was a desire from our business community to do more.” That may be, but there was also a desire from parent company Facebook, no doubt, to better monetize Instagram through ad revenue. Facebook (FB), which acquired the photo sharing site that has more than 400 million monthly active accounts, back in 2012 for $1 billion (a price that now looks like a steal), has seen its own ad revenue rise and rise. In its first-quarter earnings report in April, it reported mobile ad revenue of $4.2 billion, a 75% increase from the year before, and a figure that represented 82% of overall ad revenue. Video ads were the main driver of that stunning growth.
Instagram first launched video ads in 2014 (it had no videos until 2013), but Facebook doesn’t break out Instagram’s figures publicly. It did share that Instagram now has 200,000 advertisers; Facebook has 3 million. Instagram is under more pressure than ever to attract the ad budgets of brands who have lots of options these days, including Snapchat, which just surpassed Twitter in daily users. Instagram also just rolled out an algorithm that will prioritize certain posts in users' feeds (potentially good news for advertisers) rather than show photographs in chronological order. (See the above Yahoo Finance video.)
The new tools appear to be aimed more at small businesses than at huge brands like Disney (DIS) and Activision (ATVI), which were the first brands to run video ads on Instagram. (James Quarles, Instagram’s global head of business and brand development, says the tools are for “businesses on-the-go.”) As examples of the kind of brands that will benefit, Instagram lists Jackson & Hyde, a small handbag maker in California, and Caeden, a wearable-tech maker. In a graphic accompanying its blog post, Instagram calls Caeden an “Instagram success story” and says Caeden saw a 50% increase in reach, and a 17% increase in spending by its customers, after it promoted its new product launch on Instagram.
So, what are these exciting new business tools? For the most part, functions that Facebook already offers. In other words, this is Instagram catching up with its owner.
First, Instagram will offer business profiles to brands with an existing Facebook page. The profile distinguishes a company from an individual user, although the only way to tell is pretty subtle: a “contact” button. Instagram users can call, text or email the business, and get directions.
Second, Instagram is offering a tool called Insight, a feature we’ve seen on Facebook, Twitter, Yelp and other social companies with actionable data to sell to advertisers. The tool tells brands how many impressions a post got, plus other information to show which posts best resonated with followers, who are, of course, potential customers. Master & Dynamic, an audio company that started using Instagram in 2014, is eager for these insights.
“Up until this point we've used third-party tools to track activity, but we imagine it will be a much more seamless experience going forward,” says Mary Kate Pagano, the company’s social media manager. “We've never had any sort of demographic information on our followers; although we're able to make informed guesses based on their behavior, having hard data is always preferable to guesswork.”
Indeed, that’s the idea, according to Instagram. “We built these mobile tools to make it easier for businesses to channel the interest they create to attract new customers,” says Quarles.
Companies like Master & Dynamic may not want to abandon third-party options just yet. Jenn Herman, who runs social media strategy firm Jenn’s Trends, warns, “I think this will help businesses better understand what is really happening with their account so that they can better adjust their strategies… But I want to caution anyone who currently pays for a third-party analytics tool not to cancel those services.”
The third tool is called Promote, and will allow companies to turn “well-performing posts into ads right within the app.” That doesn’t necessarily mean more ads for users, but it means more targeted ads. A brand can even pick an old photo that was not an ad and turn it into an ad with one click (and a fee).
The business profiles and the Insight tool are free. Promoting a post comes at a cost. To determine the cost, Instagram uses auction-pricing (as does Facebook), a complicated process that depends on a number of factors, including how many other advertisers are bidding for the same placement, as well as the size of the group you’re targeting.
The new tools are nothing new compared to what Facebook and competitors of both services have, but still will excite small businesses looking to grow their brand footprint. They also will likely aggravate some, as any new features on popular platforms do. "As with any big change, this is going to get a whole lot of people all worked up," says Jenn Herman. "You'll get a slew of businesses jumping on the bandwagon, thinking this is the quick and easy way to see results on Instagram... They'll start boosting posts, promoting themselves to exhaustion, and then complain that Instagram doesn't work... Let them rant and complain. Those of us who adopt this change with open arms, and evolve with the platform as it grows, will continue to see benefits."
The tools may also represent more work for those brands. Keeping up with marketing efforts on yet another social media platform, while costly, is now necessary.
The suite of tools will be made available next month in the U.S., Australia, and New Zealand, and to the rest of the world by the end of this year.
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