Advertising Marketing and Promotion through Instagram

WHAT IS NATIVE ADVERTISING?

Native advertising is “a form of paid media where the ad experience follows the natural form and function of the user experience in which it is placed” (sharethrough.com, 2016). In other words, it is an advertisement disguised as content. Native advertising is a media centered way of reaching consumers and obtaining their attention for the entire duration of the advertisement. Consumers are viewing these native ads in a setting where they are already viewing content that interests them. Native advertisements are entertaining and engaging which leads to their effectiveness. The key to engaging the consumer is creativity. If the native advertisement is creative, the consumer will find it captivating and fun because it is appearing in a content setting that they were already seeking out. An example of native advertising that we, as consumers, view every day is branded content on Instagram.

BACKGROUND

In 2010 an app called “Instagram” was released and swept the nation. Instagram is a “community of more than 300 million users who capture and share the world’s moments on the service” allowing consumers to get a sneak peak into the lives of their peers, celebrities, and other civilians across the world (instagram.com, 2016). After 2 months, the app had 1 million users and not even a full year after its launch, Instagram had 10 million users worldwide (wersm.com, 2013). Kevin Systrom and Mike Krieger are the masterminds behind the app that now dominates all other forms of social media. Kevin Systrom is the CEO and co-founder of Instagram. When Systrom first began conjuring up this idea of Instagram, he “focused on simplicity and inspiring creativity through solving problems with thoughtful product design” which ultimately lead to the “home for visual storytelling” (instagram.com, 2016). Mike Krieger is the technical lead and co-founder of Instagram. Krieger’s main focus is “building products that bring out the creativity in all of us” (instagram.com, 2016). Within the company, Instagram has 8 major teams: Data & Analytics, Sales & Business Development, Software Engineering, Marketing, Design & User Experience, People & Recruiting, Interns & Co-Ops, and Communications & Public Policy (instagram.com, 2016). The main Instagram Headquarters is located in Menlo Park, CA. However, there are also offices in London and Hamburg, Germany.

ASSETS

In 2012, Facebook bought Instagram for $1 billion, so Instagram itself does not own anything (techcrunch.com, 2012). Its main asset is that brands can utilize it to promote themselves by paying for sponsorship spots. By partnering with Instagram, brands have a platform to promote themselves on visually. But, in order for content to make its way to your phone screen, it most likely has to pass through several hands first. The CMO of a company (in this case, let’s take J.Crew) first decides that he or she would like to set a new goal for their products. If this goal can be solved through advertising, they either approach their in-house advertising agency, or in this case, a boutique creative agency known as The Mobile Media Lab. J.Crew will then work directly with their creative agency to design an advertisement that reaches their marketing, media, and creative goals. The Mobile Media Lab’s media team then works with Instagram to figure out when this content will be seen, by who, and for how much (themobilemedialab.com, 2016). “So far there have been 500 campaigns in total globally and Instagram states that 97% of those campaigns have generated a significant uplift in brand recall, 2.7 times higher than the Nielsen control group” (econsultancy.com, 2015). Brand Recall is a way of measuring the effectiveness of an ad. This is done by showing the ad to a group of people and then at a later point in time, asking those same people if they can remember the ad (aib.net, 2012).

BUSINESS MODEL

The business model for Instagram began with the approach, “Product first, money later” (techina.com, 2012). For Instagram, having millions of dedicated users while generating no revenue worked out extremely well considering it led to a $1 billion buyout which ensured Instagram’s long lasting presence in the digital world. To generate revenue, an advertising model was produced. The plan was to allow advertisers to pay for sponsorships and accounts on Instagram. It was implemented with very similar algorithms Facebook uses when including branded content. On January 18, 2016, Instagram announced its plans to “rapidly expand its advertising model and ramp up its efforts with small businesses and users outside the US” (ft.com, 2016). This would be accomplished by working with the Facebook sales team. The implementation of branded content in the app has been so successful that they are working to create more profitable ideas.

REVENUE MODEL

Facebook buying out Instagram is what sparked revenue for Instagram and what lead to the app becoming monetized. Instagram still had intent to remain a somewhat independent “standalone photo app” (techcrunch.com, 2012). CEO Kevin Systrom stated “it’s important to be clear that Instagram is not going away” (techcrunch.com, 2012). In 2015, Instagram was “projected to generate about $700 million in revenue and $5.8 billion in revenue by 2020” (mashable.com, 2015). The analyst for Instagram released a statement saying, “Given the user scale, adv. interest, shifting TV ad spend to Digital and FB’s monetization capabilities, we are more confident in our Instagram revenue ramp from $0.7BN in ’15 to $5.8BN in ’20” (mashable.com, 2015). Although Facebook bought Instagram in 2012, advertisements were not introduced to the app until late 2013, so the monetization of the app was gradual rather than all at once (mashable.com, 2015).

NEW INNOVATIONS

Instagram has taken its advertising to a new level by introducing clickable ads. Originally, it was not possible to open a URL from an Instagram feed for the creators feared that people would divert and begin browsing other webpages (nativeadvertisinginstitute.com, 2015). Branded content implemented into Instagram was successful so advertisers wanted more from the app. “For the first time, Instagram will start showing clickable links on a limited basis in the feed, […] letting the user swipe through a series of four branded images in sequence” (nativeadvertisinginstitute.com, 2015). To avoid users visiting other sites, Instagram created a ‘Learn More’ button which will bring the user to “an internal browser within Instagram” so the user can “quickly jump back to the feed” (nativeadvertisinginstitute.com, 2015). If this new tool is appreciated by the users, Instagram will consider allowing the tool to be available for all users, not just advertisers.

Works Cited

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