BEHIND INSTAGRAM’S PROFITABILITY
As social media continues to rise in today’s modern age, one of the newest platforms that emerged following is Instagram. It started as a fun-filled application that allows a user to take and compile photos while offering a variety of filters. Recently, it was purchased by Facebook for $1B, a move which was mocked by many especially since during this time, the app still does not have revenue and is new in the field. Despite this, analysts are estimating that Instagram is now worth $35M.
So how did this generate its earnings? Like many of its peers, this photo application gets most of its income from advertising. When it was acquired, Facebook normally did not break out on its funds, but in Q3, it was able to glean 97% of its ad revenue, which reached $6.82B, a 59% increase from its last report the year before. One reason for this bolstered figure is Instagram’s venture into paid endorsements of products through its services, which attracted famous brands. The build up feature also became more sophisticated, as it now allows individuals to display slideshows outside the platform. This brand advertising capability allowed them to overtake some of their biggest competitors.
Another strength of this site is prevailing popularity and high preference for mobile phones. As of last month, a report stated an estimated 300M everyday active users, wherein 80% of this are from outside the US. Upon its procurement, Facebook was heavily denounced for its insufficient mobile at a time when it is a developing segment in terms of advertisements, as it was responsible for 84% of ad earnings for the third quarter.
Like many of its peers, Instagram started out as a fun application with no definite plan in terms of earning. It’s natural photo sharing element has become the key to its monetization, as it paved the way for it to try and advertise various products. In order to regularly keep up with trends, it just launched a live video feature plus enabled users to share disappearing photos and videos which can be seen only for a single day.
Today, the app continuously benefits especially with the rise of millennials who are known for being the digital natives, and is projected to be the dominant avenue for advertising in the 21st century.
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