Instagram is now looking to follow in the footsteps of many other tech companies, including their parent company, Facebook, and monetize. Facebook acquired Instagram for $1 billion, and with over 150 million active monthly users and growing, Instagram has not brought in any revenue. In an article from the Wall Street Journal, we learn that Facebook has sent over one of their own, Emily White, who has essentially become Instagram’s Chief Executive Officer, to put the company on the path to monetization. Like every other tech company out there, the real source of money for Instagram is in advertisements, however Instagram has some hurdles to overcome that many other companies do not.
First, Instagram’s simple design, ease of use, and “cool” factor could be damaged by the implementation of advertisements. One of their worries is that by polluting the app with advertisements, many of the 150 million users will be deterred, leading to a halt of Instagram’s growth and success.
The other issue is that a large number of companies are already advertising on Instagram, free of charge. For example, both Nike and Lululemon are running viral advertisement campaigns on Instagram. Therefore, the problem of convincing companies to switch from a method of free advertising to a paid, promotional style is a difficult sell.
Regardless, Instagram needs to find a method of monetization, before they run out of steam and miss their opportunity to become profitable. Ms. White, however, is looking in the right direction by sticking to Instagram’s current philosophy of “keeping it simple”, which is reinforced by some of the mistakes made by Facebook, which Ms. White is learning from.
If Instagram implemented an advertising system that related to promoted content and paid advertisements placed in with other pictures from those you follow, would you still use Instagram? Has the app reached a level where its popularity overpowers the risk of losing users to advertisements? Do you think that Instagram will be able to become profitable?