How Does Instagram Make Money

Instagram

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 video 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 dateOctober 2010
HeadquarterMenlo Park, California
PeopleKevin Systrom (cofounder), Mike Krieger (cofounder), Adam Mosseri (Head of Instagram)
IndustryCommunication
Business typePublic (NASDAQ: FB)
Parent CompanyFacebook (Since April 2012)

Instagram Users By Country

CountryMonthly active users, millions
US140
India120
Brazil95
Indonesia78
Russia54
Turkey44
Japan37
Mexico31
UK28

Instagram Users’ Top Interests

InterestPercentage of users interested
Travel45%
Music44%
Food & Drink43%
Fashion42%
Movies41%
Health & Fitness35%
Technology32%
Skin care/Cosmetics30%
Sports30%
News28%

Instagram Net Ad Revenue

YearInstagram ad revenue, USD billionsNon-Instagram ad revenue, USD billionsTotal Facebook ad revenue, USD billions
20161.6110.6312.24
20173.2214.217.42
20186.1817.4823.66
20199.0819.4428.52
202012.3221.3933.71
202115.6523.7839.43

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?

Usually, an Instagram user doesn’t get paid but if the user has a unique brand of Instagram content, a large audience, and huge followers then he/she can make money on Instagram.

2. What Are The Video Upload Requirements For IGTV On Instagram?

IGTV has some video upload requirements that you have to fulfill if you want to upload a video on IGTV. They are:

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?

There are many ways you can make money from Instagram. Some of the common ways are:

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?

Yes, you can get ad revenue from Instagram. Usually, Instagram shares 55 percent revenue with the content creators and it is the industry standard percentage.

5. How Many Instagram Followers Do You Need To Get Verified?

Instagram doesn’t have any follower requirements so it means there are no minimum follower requirements to get verified on Instagram. What you have to ensure is, you have an authentic, unique, and notable Instagram account that has a complete profile with every detail.

6. Can You Get Verified On Instagram Without ID?

There is no way you can get verified on Instagram without a valid ID. You will require a government-issued ID or business documents to prove your identity.          

Last Updated on May 30, 2021 by Musa D

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