The Challenge of Monetising Instagram for Facebook

April 19, 2013

Since Facebook acquired Instagram for almost $1billion just over a year ago, we have anticipated substantial changes to the service. However Facebook has yet to monetise the platform through paid advertising placements.

Some brands and celebrities, for example Beyoncé and Pepsi have taken it upon themselves to produce their own promotional content, from which Facebook gains no revenue. This suggests the time has come for Facebook to monetise the service.

beyonce-pepsi

A recent internal people move suggests that the time may have indeed come for Facebook to roll out advertising and revenue generating features. Emily White, Facebook’s director of mobile partnerships, will now head business and partnerships at Instagram, according to a report from AllThingsD. Instagram co-founder and CEO Kevin Systrom said of the move: “I’m excited to bring Emily White onto the Instagram team. As we continue to scale our operation to support over 100 million active users, her experience with partnerships and business operations will play a major role in our future success.”

Instagram reached more than 100 million active users in February and unquestionably has plenty of potential to generate revenue if White can find a way without alienating the strong and devoted userbase.

Photo sharing was pivotal for Facebook’s growth and by purchasing Instagram it has the opportunity to control the future of mobile and social photo sharing. Therefore, White needs to strike the balance through keeping the appeal necessary for growing the business whilst rolling out revenue-generating features that are friendly and unobtrusive. Overtly changing the Instagram user interface is a definite no go.

Instagram came treacherously close to crossing the line and upsetting users when it updated the T&Cs, giving the business the potential to license users’ photos. Instagram quickly backtracked but the outcry over the new terms exemplified the danger in trying to profit directly from users’ photos.

Although Facebook has yet to monetise Instagram as a service, it has been sabotaging the competition with some dirty tactics. Instagram has disabled support to Twitter Cards, effectively meaning that Instagram photos no longer ‘pop out’ when you click to view a tweet. Instead, users are presented with a link to the Instagram website if they want to view the image, successfully driving people away from Twitter and onto Instagram.

This has resulted in a fewer brands sharing Instagram photos on Twitter due to a significant loss in engagement. Twitter has reacted promptly by tying up with photo editing app Aviary but it can’t really compete with the substantial growth Facebook has experienced with integrating Instagram into its Open Graph.

It will be interesting to see what direction Facebook takes as a business, but for now we will just have to watch this space.

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