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Instagram's clutter-free environment inviting for advertisers (but it won't last)

Matt Kapko | June 6, 2014
Without a fully baked advertising platform, Instagram is building a business with old-school pricing models and direct relationships with agencies and brands. However, Instagram could soon make changes that will negatively impact the reach and efficiency of ad campaigns.

Instagram still has some of that feeling and excitement of a young Facebook. Before the clutter arrived and maybe even before your parents and grandparents joined.

Ads are still an uncommon sighting in users' feeds, but the writing is already on the wall. The world's largest advertising conglomerates are making nine-figure deals with Instagram and its parent company Facebook to get an inside track on the action. Meanwhile, full-service agencies with targeting mechanisms, analytics and creative chops specific to Instagram are growing across the country.

Even without a fully baked advertising platform, Instagram is supporting an industry with massive potential. Just follow the money.

That's a Lot of Zeros
Instagram struck its first major advertising deal with an agency in March, securing a $100 million commitment from Omnicom. Two months later and just weeks after its $35 billion merger with Omnicom fell apart, Publicis Groupe inked a deal valued around $500 million with Facebook and Instagram.

Now may be the best time ever for marketers to use Instagram, but brands should be preparing for a sprint instead of a marathon, according to a report penned by Forrester Vice President and Principal Analyst Nate Elliott. The top brands studied by Forrester generated a per-follower engagement rate that's 58 times higher than Facebook posts and 120 times higher than tweets.

"As users and marketers flock to Instagram, clutter will increase and Instagram will likely begin filtering out brands' posts in the name of relevance. Marketers must use Instagram now, before it changes the rules — and they must be ready to move on to another social site when Instagram's phenomenal engagement rates disappear," Elliott writes in the report aptly titled " Use Instagram Now."

Here's why brand's see greater success on Instagram: It attracts fewer people and marketers than Facebook and Twitter, it doesn't algorithmically or otherwise filter out brands' or users' posts, and the median age for an Instagram user is 27 compared to Facebook's median age of 40.

How Long Before Organic Reach Declines?
"Instagram's active user base has doubled in the past 13 months and we believe that more brands will soon pursue this audience," Elliott writes. "Instagram's days as a blissfully clutter-free environment are numbered." Marketers stand to lose much of the organic reach they enjoy today, similar to what's played out on Facebook over time.

"Instagram's struggle to introduce ads is a problem for brands," Elliott adds. "Instagram's two tests of paid advertising have met significant resistance — and that's not just bad news for brands hoping to buy ads. If Instagram's users don't accept ads from brands they haven't followed, the site will have only one ready-made revenue stream: Convincing brands to promote posts to their existing followers. That could motivate Instagram to more aggressively reduce brands' organic reach."

 

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