Facebook made social media popular, but Instagram played an integral role in shaping these networks to what they are today. This brand made sharing video and photo posts a new normal and revolutionized the entire market. It is best for those who want to market their brand and as well as get fame.
It doesn’t come as strange that Facebook purchased Instagram in 2012 for no less than $1 billion! The whopping sale was a marketing move that connected the two major social channels, which is why this company tops the list when it comes to advertising.
What is the situation in 2023? How does Instagram make money, and why is their business model so successful? Those who want to know more about this topic should continue reading right away!
Table of Contents
Instagram: A Basic Overview
Instagram is a social network where visitors can post images and videos. Apart from sharing photos, it is possible to record videos and capture images using the integrated mobile app.
The network functions based on followers. Users can find friends’ and business’ profiles that make relevant content and subscribe by “following” them. That way, as soon as posts on those pages, the interested audience sees it in their Home timeline.
Apart from standard updates, Instagram also added the option to add stories. Although they might have copied this from Snapchat, this was not the only brand that added the story option.
Both individuals and businesses use Instagram. This product is an integral part of the social culture. It enables account owners to stay in touch, but many use it for personal promotion and marketing, too. That is why the network is filled with bloggers, influencers, and other people who make money via this platform.
Businesses don’t hesitate to use this media as a marketing platform for promoting their product. They can reach an additional audience, interact, and strengthen relationships with potential customers. It is this all-around approach that launched Instagram among the best social brands out there.
How Does Instagram Make Money: Two Ways of Profiting
It is nice to see and like what friends post on social media, but how does IG make money? As it turns out, sharing photos and videos are an excellent way to make a story that will attract the audience.
The statistics indicate users turn to this network when they need new products. It is convenient to see images and videos of it in action, as well as communicate with the brands.
Here is an overview of the Instagram revenue methods.
Ads
Does Instagram pay off to the advertisers who select this network? According to the official website, two million brands are advertising their products on this media. That is enough to conclude that this website is profitable and will remain a smart investment for any business that wants to use it.
Here are a couple of quick statistic facts about Instagram ad revenue:
- A story ad that utilizes a cost per click (CPC) model is priced at $0.50.
- A classic post ad in the Instagram feed costs $0.60 if the CPC model is used.
- Using a CPM (cost per mile) method costs $0.90 in Stories.
- The CPM method for classic feeds is valued at $1.65.
What About the Available Ad Formats?
Any business can choose between seven different advertisement types in 2023. Here’s the answer to the question, “How does Instagram make money on ads?”
Story
These commercials appear while the audience browses stories. Advertisers use the opportunity to place their ad between two stories hoping their message will be interesting enough for the user to like it and follow the link to the website. Videos are more common for this ad type.
Photo
A business that decides for this option should design a top-quality photo. It should be relevant and of high resolution, as well as deliver the desired messages. The idea is to make the user attracted to the product and stand out from the competition.
Video
A fine marketing strategy can also be to place a video in the feed. If the sound is on, users might be attracted by that component, too.
Carousel
These ads feature a collection of photos or videos. The idea is to present a series of products the brand launched. Call to action icons usually take the visitors to the shop where they can purchase those items.
Collection
The audience doesn’t have to leave Instagram to purchase products. The collection ad post takes users directly to the storefront installed by the network. Many consider it an integrated e-commerce feature, and many users like this option.
Ads in Explore
This is placed on the screen where a visitor looks for new but relevant content. As long as the ad is done correctly, it can be an excellent way of promoting the brand for little money. Users are more tolerant of advertisements placed in this section.
IGTV Ads
Although the TV is not that popular on this network, it might be possible to boost engagement this way. Recently, Instagram has introduced a new way for businesses to earn money directly from the app. They will run 15 seconds long ads on IGTV videos.
However, since this is a new method, not many brands use it at this moment.
Shopping
Facebook is the network that acquired Instagram, but this media took the best useful features from other platforms, too.
Either way, the function turned out to be a great success. Instagram Shop allows brands to add their catalogs to the website, which becomes a true e-commerce store.
Here are the available options:
- Head to the business account profile and include a Shop section. From here, the audience can purchase products while remaining in the app.
- The tagging option for a product allows a brand to tag an item like friends.
- Option to promote items in Stories on the network.
- Use shopping ads to link and promote items from the catalog.
Does Instagram pay off to advertisers? Yes, definitely, and that can be seen by the sheer number of brands attracted to this marketing platform. Here is how they make money from shopping in 2023.
Checkout Fees
Remember that users can purchase an item from within the app? Those who use this option need to pay a fee to Instagram.
Here is a quick overview:
- The advertiser designs a post with a purchasable item and a link to it.
- A visitor sees the tag and clicks on it.
- They are taken to the page with the item description. It is possible to see photos and additional information about the offered object to determine whether they like the product.
- The customer heads to the checkout page if they want to buy the item. When the business sells them the item, a portion of the profit goes to Instagram.
Instagram Shopping Ads
This is a specific category of ads that a business can use to promote particular products. The link can take the user from posts to the Instagram checkout or to a third-party store, which is convenient.
How Much Is Instagram Worth?
Has anyone ever wondered how much is Instagram worth? It sounds logical that the platform counts its money in millions. Bloomberg valued this network at $100 billion two years ago. Today, that number can even be higher because they are the most popular online community network in 2023.
Here are some impressive statistics that show how popular Instagram is:
- The platform has more than 500 million posted stories every day.
- Nike is a brand with the biggest follower base, and its Football account had over two million interactions in 2018.
- The majority of marketers spend half of their influencer marketing budget on this network.
- Fashion influencers earn the most from sponsored ads, although travel is the primary interest of Instagram users.
- The United States is the country with the most Instagram profiles – 110 million registered accounts.
Why Is Instagram So Popular?
The secret lies in the unique Instagram business model, which is a logical explanation. The approach is simple – users browse and like content by checking out images and videos.
Here are some reasons behind the high Instagram worth:
- The option to interact with brands
- The capability of capturing videos and photos within the app
- A long list of filters to edit images and videos
- IGTV, stories, and other additional functions
- It is a convenient marketing platform.
The statistics indicate that an average visitor spends around 25 minutes daily, browsing Instagram posts, which is impressive.
Is Instagram a Profitable Business?
Does Instagram pay off to its owners? Not only to them but also to most advertisers that use this platform. Many find it a better option than Facebook, and here is why:
- Interact with younger audiences: the reports indicate that 72% of all teens are on IG, and most users on this platform are younger than 34.
- Clickable and actionable: the statistics are clear – over 100 million of people who see the ad might click it to learn more about it.
- Ready to shop: users often browse IG to find items they might need, which means they are ready to spend money on a product.
- Global audience: although the US has the most accounts, IG is popular all over the globe.
Why Instagram and Its Revenue Are Crucial to Facebook
Facebook made a critical decision when it acquired IG. That is supported by a report that they are the company’s service that is most profitable. Instagram revenue was $20 billion in 2019, which is more than 25% of the overall FB earnings that year.
It sounds understandable because the entire Instagram content is tailored to marketing experts. Think about it like this – is it possible to place adverts in stories? Yes, and what about placing them as classic posts in the feed? The answer is again, yes, and it remains the same for IGTV and the Explore section.
Though, they started testing the IGTV ads feature that will allow influencers to earn directly from the platform. Facebook knows how to best exploit opportunities to boost earnings, which is why everyone can only expect this service to remain successful.
FAQ
Can You Actually Make Money From Instagram?
Whether an individual or business, it is possible to increase revenue by taking advantage of what IG offers.
Here is how:
- Contact businesses to advertise their items.
- Influencers can place sponsored posts on their profiles.
- Become an affiliate and get a portion of the profit for every sold item.
- Offer visitors a paid service and charge for it.
There is no best method; it only depends on what suits someone’s preference.
Which Company Makes More Revenue: YouTube or Instagram?
By comparing the revenue from advertising, it is possible to discover that Instagram is more profitable. The platform earned $20 billion in 2019, which is significantly more than $15 billion earned by YouTube. However, there is a trick that YouTube creators appreciate. This network is ready to share a portion of the revenue with authors.
According to the reports, YT paid $8.5 billion to acquire the content. If that is implemented, it is safe to say that YT exceeds IG in ad profit.
Instagram’s Profitable Future
Instagram made a true revolution when it comes to shopping via online community platforms. They left traditional ads in favor of smart mechanisms that integrate purchasing features within the app. The network even implements IGTV to focus specifically on videos, and they are already dominating the image sharing market.
It is easy to claim that Instagram will remain profitable in the years to come. You are welcome to post in the comments whether they agree with this. By discussing the issue, everyone can learn more about it and discover what to expect in the future!
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