A preview of Instagram's Insights tool. The company announced it has 1 million active advertisers.... [+]
Instagram's investment in free tools for businesses is paying off.
The popular photo-and-video sharing app has more than 1 million monthly advertisers, up five times from a year ago, the Facebook-owned company said on Wednesday. The number of marketers on Instagram has risen steadily alongside the number of "business profiles" on the app, which allow companies to share contact information and directions, as well as to message directly with people via Instagram. There are now 8 million business profiles on the app, up about five times since September. The rise in marketers can be attributed in large part to Instagram's focus on catering to small businesses, which make up the majority of Instagram's advertisers, and its growing suite of free business tools. Most business profiles are by firms in the U.S., Brazil, Indonesia, Russia and the U.K.
"One million advertisers is a big milestone, particularly because of the scale and diversity of the businesses on Instagram," Instagram's VP of business, James Quarles, said in a phone interview. "Businesses are drawn to Instagram because it's a place where people follow passions, everything from mainstream interests, like their favorite musician, to niche hobbies like candy art."
"People are in a mindset of being open to discovery," Quarles added, noting that users' interests can be used as targeting signals for ads.
Together, Instagram's one million advertisers and 600 million monthly users make a big business. Instagram is expected to generate $3.64 billion in advertising revenue globally this year, according to forecasting firm eMarketer. By comparison, Facebook generated $8.81 billion in revenue in its latest quarter. Instagram's ad business has grown rapidly since the company first started selling advertisements in late 2015, buoyed by Facebook's network of more than 4 million advertisers and its expertise in sales and targeting.
Beyond interest graphs and a massive user base teeming with millennials, free tools for businesses have also translated into more marketers. Businesses that advertise on Instagram can access an Insights tab to view stats on their posts such as the number of times their posts have been saved, commented on, liked or viewed and learn more specifics about their followers, such as their location, gender and age. Instagram also gives businesses, especially those with tight marketing budgets, the chance to observe how their unpaid posts perform organically before deciding which creative to promote in an ad campaign. Instagram plans to continue rolling out new free tools for businesses over time. The company, for example, is launching a new "booking" tool globally in the coming months to allow users to set up services such as haircut appointments and restaurant reservations through business profiles.
"Many small businesses don't have a website or the traffic to sustain a separate place for booking," Quarles said. "They just want to have that as part of their Instagram experience. We're just getting started in building the tools businesses would like to find customers and get people to stores."
It's also easy for a business owner to run an Instagram ad campaign directly on a mobile device on-the-go, Quarles said. For busy business owners, it helps that only four taps are required to create an ad from a business profile. Instagram's sister apps Hyperlapse, for making time lapse videos, and Boomerang, for short looping video clips, let advertisers quickly create more animated content. Multi-post photo-and-video "carousel ads," which give marketers more space to deliver a message or feature multiple products, are another popular format, Quarles said.
Stats on the interactions between users and businesses on Instagram suggest the company's tools are working so far. More than 80% of Instagram users follow a business on the app, and in the past month, more than 120 million users have used business profiles to visit a website, get directions or contact a firm, Instagram said.
"We're proving that visuals, even on a small screen, are a powerful way to communicate what a business stands for," Quarles said. "Small businesses love how easy it is to open an account and start posting pictures."
And like on Facebook, Instagram's targeting abilities can also enable new, niche businesses to find their first customers.
"Founders can start small and grow their business with ours," Quarles said. "If you're opening a business today, no matter what, you'll start on Instagram and Facebook."
One entrepreneur who started her business on Instagram is Suann Song, founder and creative director of Appointed, a Washington D.C.-based paper goods company, whose products include carefully designed and personalized notebooks and planners, among other items. In 2015, Song used Instagram to draw attention to the Kickstarter fundraising campaign for her business, and visually express the concept for her brand. Appointed became profitable six months after launching.
"Instagram is so successful for us because our customers have a discerning eye," Song said in a phone interview. "The moment you look at our feed, you instantly get a sense of who we are and what we do."
Song first started paid advertising in the third quarter of 2016, running ads on Instagram and Facebook, which enabled her to target people who had browsed her website but didn't purchase anything, as well as people who were fans of a magazine that featured her company. Song recently debuted a new product exclusively on Instagram, launching a multi-image post and using the best-performing creative for the ad, nearly selling out the product. Song now sells more than 50 products across 300 stores.
"People ask what we attribute our growth to," Song said. "It's hard to build a brand, and paper is so saturated. We couldn't have done if without a service like Instagram -- It's so accessible and powerful if you know how to use it."
While building out its ad business, Instagram has also evolved dramatically as a product. Instagram launched a near-clone of Snapchat's core "Stories" feature this summer, giving users the option to share ephemeral photo and video clips with colorful graphics and text. The feature, which has been a hit on the app (Instagram most recently said 150 million people use Stories daily), along with the launch of live video, has helped transform Instagram from a platform for sharing sporadic, manicured photos to a service for daily sharing. And the new features aren't just for users. Businesses are also "very active" users of Stories, Quarles said, using the tool to show behind-the-scenes, experiential footage.
"2016 was really a defining year for Instagram," Quarles said. "We've made more changes in the past year than we have in the prior five."
"We're really pleased with the community's adoption of new products," Quarles added. "At the same time, we've been building a thriving business."
