Instagram's success shines through above the other social media monoliths of the year by capitalizing on its own popularity. Instagram has been deemed the "supreme ruler" of social media by marketing giant SumAll. But how did the photo-sharing social media site that was started in 2010 and purchased by Facebook for over a billion dollars in 2012, win the favor of techies, investors and advertisers alike? Simplicity. "You have to explain everything you do, and people have to understand it, within seconds," said founder and CEO, Kevin Systrom, in an interview with Fast Company. Instagram took 551 days to go from zero users to over 30 million. Halfway through its second year of existence its valuation was higher than the New York Times. As of January 2014, the site has 150 million monthly users.
Turning Popularity Into Profit
Emily White, Instagram's new chief operating officer, joined in March 2013 with the goal of making the popular platform profitable. She decided to slowly in introducing ads, as her priority was to retain the loyalty of Instagram's users. White acknowledges the importance of maintaining the "cool" factor while integrating advertising. "We want to make money in the long term, but we don't have any short-term pressure," she said. Advertising was introduced to the platform in late 2013 and was integrated seamlessly into the site's visual style and content. "Instagram's current advertising strategy doesn't disrupt the pleasure of looking at its clean-cut stream of images," wrote Digital Trends' Kate Knibbs. While Instagram was introducing advertising, 65% of the world's major brands were active on Instagram and nearly all of them posted at least one photo weekly. Brands that already had an Instagram following gained an enormous head start in advertising on the platform. When Levi's began running ads in November 2013, they already had 155,000 followers.
The Young Demographic
Advertisers are particularly excited with Instagram's teen and 20-something demographic because this age group hasn't yet crystallized their buying habits. Seeking the trendy and edgy, the youth are the holy grail for many advertisers. "Using Instagram for your business is the best option to see real ROI, especially if you're selling a visual product," according to SumAll. SumAll's research shows that U.S. advertisers have seen a 1.5 to 3 percent increase in revenue from recent Instagram campaigns.
A Bright Future
Since Instagram's acquisition by Facebook, many see it as a supplement to Facebook's revenue, according to Gigaom's Om Malik. He notes that digital display ad spending is increasingly going toward mobile devices, and that by 2017, half of digital ad spending in North America will take place on mobile devices. The new heights of ad quality and the progression toward native advertising is filling the open space left by the decline of traditional banner advertising. Photo Credit: chankai via Flickr.