How does InstaGram Make Money – Unicornomy Analysis
About Instagram, Funders, Founders and Facts
InstaGram was started just for fun, just like other social networks, with no intention or clear visibility to make money any time in the near future. It is a photo sharing app that does just one thing, share photos in a vertical array of pictures from millions of user accounts.
Instagram was created by Kevin Systrom and Mike Krieger. They named this app as BurBn in the beginning but chucked it halfway after closing a seed round of 500K USD investment from Baseline Ventures and Andressen Horowitz – who btw have made a killing after FaceBook acquired them for cash and stock deal of 1 Billion USD. FaceBook is known to make such outrageous purchases in order to stregthen its mobile user base and usage and thus it had also made a purchase of 19 Billion USD to purchase WhatsApp. Both InstaGram and WhatsApp had near Zero Revenue prior to acquisition by FaceBook.
Interesting Read : How does WhatsApp Make Money!
How does InstaGram Make Money
Before we move on to understand the business model of InstaGram we should be aware of the various tools and features that InstaGram has to offer (because its revenue depends on these features).
The explore tab in which some photos are featured (Opportunity for brands to use the Promoted feature) when a user clicks the tab. Users can explore this section by using hashtags that they find useful.
The Lux effect, gives an option to adjust the exposure of the image through a 100-point slider.
InstaGram was photo only sharing app. Instagram started video sharing to allow users to share videos (recorded or reshared) for lengths upto 15 seconds (similar to SnapChats 10 Second Videos) which was later extended upto 60 seconds. Brands can share their Videos as well while promoting their Services and Products.
A Direct competition to SnapChat’s Business Model of directly sharing it to user or a group of users (minus the disappearance) – Users can share photos and videos.
A Rip off from SnapChat Stories / Live. Here Brands can sponsor promoted stories from FaceBook Ad-Dashboard.
Business Model of InstaGram
InstaGram makes all of its money from Ad Sales – The Ad Units are the exact same as the ones in FaceBook Ads Manager, infact the ad settings to be displayed in the InstaGram feed come from the ads Manager itself. While you are setting up a FaceBook ad, you have an option to push the ad unit to InstaGram as well.
Ads can be of 3 Types: Image Ads, Video Ads and Carousel Ads
Ads Can be used to target either of the following image’s contents and can be posts, pages, website, videos, app downloads etc.
FaceBook does not split the earnings it does so we are unable to identify the exact source of the ad revenue coming to them. The next screenshot shows how the ads can be set up using FaceBook Ads Manager:
How does InstaGram Make Money from Selling Data
Yes, you heard it right! No one claims this but their updated terms and conditions use multiple variations to this :
Interesting to Read for Data Selling : How does Twitter Make Money
& This was later explained that this is confusing and InstaGram would not sell your pictures to any advertiser or buyer! But who knows. Their total earnings form a part of FaceBook’s earnings, so it is better if you guys head that way and read How FaceBook Makes Money.
Interesting Read : How does FaceBook Make Money!
Interesting to understand this, InstaGram competes with Many other players in the mobile app based social network or chatting app in terms of Mind Share of the user. Because InstaGram’s major user base is in the 18-35 category the most fierce competitor is SnapChat – on account of its similar user base and disappearing photos. Here is the business model of SnapChat in the next link.
Interesting Read : How does SnapChat Make Money!
Disclaimer: The understanding of the How does InstaGram Make Money is of the Author’s himself, neither any investor, banker or VC (local or global) or qualified consultants or the company have confirmed or explained the same to the author and the descriptions, stats, facts and figures, if used, are either obtained through secondary web research or interrogation of relevant search professionals or other resources on the web. Please use your own discretion to use this info when required and by continuing to read, you agree to indemnify the author & Unicornomy from the entire liability arising out of using this info on your own.