One of the world’s largest social networks will introduce an advertising platform for a select number of US-based companies. Instagram, which was acquired last year by Facebook for $1 billion, will begin showing ads to its US-based users.
The social network has over 150 million regular users, but has failed to generate any income since it was founded three years ago. The company allows users to post their photos online, and to comment on the photos of their friends and followers.
Despite the company’s immense popularity, it has failed to demonstrate its ability to produce revenue since doors opened three years ago. Early attempts to license user photos to advertisers were met with fierce opposition from users, who objected to the company’s new terms of service.
Instagram’s issues mirror those of other start-ups like Twitter and Facebook, which both struggled with revenue issues in their early years. Facebook’s profits have been improving substantially after its advertising platform attracted the attention of large corporations, but Twitter still struggles with lagging revenue and minimal profits.
Advertising on social media platforms is growing rapidly, with leading companies such as Facebook posting improved revenue figures with every quarter. Analysts, along with the company’s founders, believe that Instagram could create a viable advertising network of its own.
With $9.5 billion spent on social advertisements every year, Instagram could enter a large and lucrative market with its own advertising platform. However, advertising experts believe that the photo-based social network may struggle to make a profit.
Facebook’s advertising-based revenue growth has been dependent on the platform’s excellent targeting capabilities – features that, aside from basic factors such as area, age, and gender, Instagram doesn’t offer.
The success of Instagram will depend on advertisers being able to use attributes to successfully target certain users. We expect to see more information on Instagram’s advertising platform in the coming months.
