Facebook Will Monetise Instagram – But How?

For the early-adopting hipsters that popularised the photo-sharing app Instagram, its buyout by Facebook was welcomed like their mum turning up wearing skinny jeans. It was inevitable that change was on the way and Facebook has now begun testing the service as its route to making money on mobile. Just as they find out their mum has started hanging out in East London.

Facebook has so far proved that you can have 1bn users and not be making enough money. And as a publicly listed company, it really needs to start making something back for its shareholders, particularly on the costly buyout of the Instagram app company. Of course, as Instagram’s co-founder, Kevin Systrom, said in a clarifying blog after the news spread, and suggestion of a boycott gathered pace, the service was created to become a business.

While he has denied that the company will sell users’ photos, social advertising in-app, with branded accounts and the potential for your preferences to be considered as endorsements are well on the way. While Instagram says on its website that it is looking at ‘innovative advertising’, this sounds very similar to what Facebook is doing, and is struggling to monetise.

But if I like something on Facebook, or follow an account on Instagram, does that mean that I advertise it? Questions have already been raised about whether people have even ‘liked’ things that appear on their Facebook feeds, and some have even claimed that dead people are managing to endorse brands from beyond the grave.

“Our main goal is to avoid things like advertising banners you see in other apps that would hurt the Instagram user experience. Instead, we want to create meaningful ways to help you discover new and interesting accounts and content while building a self-sustaining business at the same time,” Systrom said.

So what does the future hold for Instagram – apart from the inevitable need to generate some cash? As with many changes that Facebook has introduced, while there is the usual push back and the most determined leave the service, many people accept them as the price of free access. If a service is free, you are the product, so the saying goes. Users have to ask themselves what they are comfortable with sharing while accepting less control. They have until 12 January to remove their profiles before the experiments with brands and advertising start to happen.

Instagram could opt for a paid-for, ad free premium service, although this could reduce the appeal of its inventory to brands by reducing the number of affluent, desirable advertisees. Microsoft computer science researcher, Jaron Lanier, told Newsnight: “The internet has to be about more than advertising or it’s a path to nowhere.” Alluding to a looming advertising bubble, he said that if we wanted to build the ‘information economy’, people have to be able to share money and buy things on Facebook. But that means they have to trust it.

The question has started to be asked – can and will people start charging for their data? Or could they be given more opportunity to say ‘yes, I want advertising about cars, holidays and business solutions, please do not send me things about…’? For more on what these developments could look like, see i-allow.

Could this very 21st century problem end up with one social network bringing down another? The #boycottinstagram campaign on Twitter sure hopes so. Or is this all just a Twitter storm in a tea cup?

Meanwhile, Facebook’s founder Mark Zuckerberg has announced the donation of $500m worth of Facebook stock to charity…

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