Instagram is a very popular photo and video-sharing social networking application launched on October 6, 2010, by Kevin Systrom and Mike Krieger. Over the years it has become very popular because Instagram allows the user to use various filters on photos and share them with followers. In April 2012, Facebook bought Instagram for around $1 billion in cash and stock which left many Wall Streeters puzzled because at that time Instagram had no revenue. However, in 2021, Instagram generated 18.16 billion U.S. dollars in revenue and now people are wondering how Instagram makes money.
There are many ways Instagram makes money. Their main source of income is from selling advertisements. They also earn money from story ads, photo ads, video ads, carousel ads, IGTV ads, etc. Instagram also has a shopping feature that allows users to buy products directly from Instagram. Instagram also earns revenue indirectly from data management.
What Is Instagram?
Instagram is a photo and video sharing platform now owned by Facebook. Mainly, Instagram is a mobile app that allows users to take a picture, record videos, and share them with their friends, family, and followers. Moreover, Instagram allows its users to interact with other users using like, comments, and chat features. Both individuals and companies can use Instagram and connect with their audiences. A business can use Instagram as a marketing platform to build its brand awareness, interact with new customers, and sell products.
Key Statistics Of Instagram
Instagram has monthly 1 billion users and about 500 million daily active users of Instagram Stories. According to Instagram, 51.2% of total users are female while 48.8% are male. According to Influencer Marketing Hub, 39% of brands spend over 20% of their marketing budget on Instagram.
Overview Of Instagram
| Launch date | October 2010 |
| Headquarter | Menlo Park, California |
| People | Kevin Systrom (cofounder), Mike Krieger (cofounder), Adam Mosseri (Head of Instagram) |
| Industry | Communication |
| Business type | Public (NASDAQ: FB) |
| Parent Company | Facebook (Since April 2012) |
Instagram Users By Country
| Country | Monthly active users, millions |
| US | 140 |
| India | 120 |
| Brazil | 95 |
| Indonesia | 78 |
| Russia | 54 |
| Turkey | 44 |
| Japan | 37 |
| Mexico | 31 |
| UK | 28 |
Instagram Users’ Top Interests
| Interest | Percentage of users interested |
| Travel | 45% |
| Music | 44% |
| Food & Drink | 43% |
| Fashion | 42% |
| Movies | 41% |
| Health & Fitness | 35% |
| Technology | 32% |
| Skincare/Cosmetics | 30% |
| Sports | 30% |
| News | 28% |
Instagram Net Ad Revenue
| Year | Instagram ad revenue, USD billions | Non-Instagram ad revenue, USD billions | Total Facebook ad revenue, USD billions |
| 2016 | 1.61 | 10.63 | 12.24 |
| 2017 | 3.22 | 14.2 | 17.42 |
| 2018 | 6.18 | 17.48 | 23.66 |
| 2019 | 9.08 | 19.44 | 28.52 |
| 2020 | 12.32 | 21.39 | 33.71 |
| 2021 | 15.65 | 23.78 | 39.43 |
How Does Instagram Make Money
Instagram’s business strategy is unique and it is evolving with time. Instagram has a mixed business plan of visual storytelling and influencing. Statistics showed, around 70% of shopping enthusiasts use Instagram to discover new products. This is a clear indication of why various brands love Instagram and why they are spending billions of dollars on this platform. So, Instagram’s revenue-generating sources are:
1. Advertisements
2. Story Ads
3. Photo Ads
4. Video Ads
5. Carousel Ads
6. Collection Ads
7. Ads In Explore
8. IGTV Ads
9. Shopping
Advertisements
This is the main source of Instagram’s income and Instagram generates the most revenue from the ads. In fact, according to Satista.Com, Instagram will generate around 40% of ad revenue to Facebook by 2021. More than 2 million advertisers advertise on Instagram every month. According to the Business of Apps –
1. The cost per click (CPC) for Instagram feed ads is around $0.60 and for Stories $0.50
2. The cost per mille (CPM) for Instagram feed ads is $1.65 and for Stories around $0.90
Usually, Instagram shows advertise in the following formats:
Story Ads: Stories on Instagram are “day moments” and these stories self-destroy themselves after 24 hours. Businesses can show their products on stories that will pop up in between two-story slides. These stories also include features like visiting a website, answering a poll, giving feedback, etc.
Photo Ads: These types of ads are similar to photo posts on Instagram. Though, the photo ads have a sponsored tag and a call-to-action button.
Video Ads: Video ads are quite similar the photo ads but video ads can form up to 120 seconds long. These videos can be landscape or square format they also have a call to action button.
Carousel Ads: This type of ad is an extension to traditional ads and here a user can swipe to see additional photos or videos in a single ad.
Collection Ads: This type of Instagram ad contains a swipeable carousel display of product images under a cover image or video.
Ads In Explorer: Instagram’s explore page contains real-time content from different users or accounts that a person doesn’t follow yet but they have shown interest in them in a post or video. Usually, this type of ad is targeted by brands for users who have a discovery mindset. Moreover, this type of ad will create brand awareness.
IGTV Ads: IGTV is a vertical long video platform from Instagram and it runs on user-generated content. It is quite similar to YouTube or TikTok but has a different purpose. Instagram monetizes IGTV similar to youtube and shares the revenue with the content creators.
Shopping
In the last few years, Instagram has copied some of Pinterest’s revenue-earning strategies like the shopping features. So, Instagram now also works as a discovery platform just like Pinterest and it lets people shop the products directly from Instagram. The Instagram shop allows the user to integrate the product category with the Instagram profile so that the user can –
1. Add a Shop tab within the profile
2. Add and tag Shop products in the posts
3. Promote the product in the Instagram Stories
4. Run an Instagram Shopping ad
All the above features ensure that the other Instagram users can easily see all the products of the sellers without leaving the Instagram app. So, if you are wondering how Instagram makes money from shopping then keep reading below –
1. Instagram allows the buyer to freely buy the product on Instagram but they charge a small fee from the sellers for the sales.
2. Instagram also generates revenue from Instagram shopping ads. This type of ad has a tagged product that a user can buy directly from Instagram or on other channels.
FAQs About Instagram
1. Do Instagram Users Get Paid?
2. What Are The Video Upload Requirements For IGTV On Instagram?
1. The video must be at least one minute long
2. If you are uploading from a mobile phone then the video can be a maximum of 15 minutes 3. long and if you are uploading from the web then the video can be 60 minutes long
4. All the videos must be in MP4 file format
5. The vertical video must have an aspect ratio of 9:16 and the horizontal video must have an aspect ratio of 16:9
6. All the videos should have a minimum frame rate of 30 FPS
7. The minimum resolution for a video is 720p
3. What Are Some Easy Ways To Make Money From Instagram?
1. Work with brands on sponsored posts
2. Become an affiliate
3. Open your online store
4. Sell your photos online or on things
4. Can You Get Ad Revenue From Instagram?
5. How Many Instagram Followers Do You Need To Get Verified?
6. Can You Get Verified On Instagram Without ID?
References:
1. https://whatisthebusinessmodelof.com/business-models/how-instagram-makes-money/
2. https://www.feedough.com/how-does-instagram-make-money-instagram-revenue-model/