The Advertising Sector Is Changing Right Beneath Your Finger

Picture showing Instagram login.

Image: Energepic.com, Pexels, Pexels License

By Edwina Biggs

With the introduction of social media, the avenues in which a business could conduct itself multiplied. Suddenly there were new ways to market a business and completely new spaces to conduct one from. With the increase of consumers using social media business’ have also increased their social media presence, especially, in recent times, on Instagram.

 

What is Instagram

 

Instagram is a social media app that is based around sharing photos or videos. Users can post their own photos, videos or story. A story can be either a photo or a video that is only available for viewing for one day. They can caption and geotag these posts.

 

Users also follow other accounts to view, like, comment on and share their content. This content can be shared through private messaging or onto one’s own story. Private messaging can be in direct response to a story, independent, or through direct photos.

 

The feed originally appeared in reverse chronological order and is now based on post engagement. On the app people have asymmetric follower relationships, meaning they can follow or be followed and that action doesn’t have to be reciprocated (McNely, 2012).

 

Hashtags can be used on any post which links all posts under the same hashtag together. Hashtags usually centre around a certain event or campaign and essentially encourage users to post about it (Carah & Shaul, 2016). Lots of events will have props labelled with the hashtag which encourage users to engage in taking photos and sharing on social media. This creates more free exposure for the brand.

 

The app is also fitted with an explore page which is a collection of content that is affiliated with the user’s interests or who they follow’s interests. Advertisements also appear in feeds amongst the other content.

 

The History of Instagram

 

Instagram is a newer platform of social media first launched in 2010, exclusive to iOS. The idea was to have a mobile sharing app where one could shoot, edit (the colours, the framing, the lighting or use one of Instagram’s iconic filters) and share a photo within minutes, all in square format of course (McNely, 2012).

 

It was developed by Mike Krieger and Kevin Systrom who met at Stanford University. Systrom had built an app, Burbn, that allowed people to check into locations, gain points for doing socialising and share photos of hangouts (Garber, 2014). The app wasn’t largely successfully, more than likely due to its complicated features.

 

He brought his friend Krieger on to the project and through analytics they realised that no one was using the check in features. The apps success was in its photo sharing feature. From this point they focused on the photo sharing feature and discontinued everything else. They saw an opening in the photo sharing app market between Hipstamatic (another photo sharing app of the time) and Facebook. After many subsequent prototypes, Instagram was born.

 

Picture showing photo taken on Instagram.

Image: Jeremy Levin, Pexels, Pexels License.

 

The year following its release in 2011 Apple names Instagram the “app of the year” and the following year Instagram released a version compatible with android (McNely, 2012). At this time Instagram was estimated to have 30 million users and now 1 billion people around the world use Instagram actively. In 2012 Instagram was bought by Facebook for 1 billion dollars. In 2014 the app released their analytics feature which has been largely appreciated from a business perspective (Carah & Shaul, 2016).

 

The photo sharing app is now one of the biggest platforms and has a high standard of engagement. Instagram from the beginning had a large proportion of active users surpassing Twitter in this sector in 2015 (Hook, 2015). In 2017 it was reported that Instagram had 500 million daily users whilst competitor Snapchat has only 178 million active daily users (Choi & Sung, 2018). In the same year, 2017, Instagram’s competitor Pinterest had 200 million active users (Statista) and YouTube had 1.5 billion active users (Hutchinsons, 2017).

 

Instagrams CEO’s and Co-founders Kevin Systrom and Mike Krieger resigned in September 2018. In a statement the pair said they were grateful but ready to move on (Instagram Info Centre, 2018). Facebook has appointed Adam Mosseri as Instagram’s new CEO.

 

Instagram’s business model

 

A business model is comprised of two sides; delivering the product/service efficiently and creating income (Credit Control, 2018). When Facebook bought the app back in 2012, Instagram had a functioning model of delivering its service however had zero revenue.

 

In 2016 Instagram released its updated business model with plans to rapidly expand its advertising model and increase efforts with small business as well as users from outside the US (Murad & Cookson, 2016). The aim was to see more smaller business advertisements amongst big brand advertisement which is currently dominating this sector.

 

This focus on advertisements has been reflected in business’ at large. Shifts in business models are occurring everywhere. Pepsi did not pay for a super bowl advertisement for the first time in 20 years in order to put those millions of dollars into social media advertisements instead (Qualman, 2009). Ford has adjusted their budget so 25% goes into digital marketing. Digital marketing has become a huge focus for business’ and Instagram are aware of this.

 

The way business’ market their products has changed drastically since the introduction of Instagram. How business’ market themselves to customers has become a lot more personal, which is enabled by the instant and direct nature of the platform. It has been reported that that the ‘snapshot aesthetic’ of Instagram has proven more effective than the traditional studio aesthetic, it makes the viewer feel more personally connected (Colliander & Marder, 2018).

 

The platform also allows for direct customer to business communication. Negative feedback is easier to find through posts and comments, which allows business’ more time to focus on the solution rather than finding the problem (Qualman, 2009).

 

The advertising content can also be produced through various avenues on the platform. Users can follow a company to see the content they produce. Companies can pay for advertisements to then be put into users feeds. Companies can also pay an Influencer to promote their products. An influencer is a person with a large following on Instagram and are perceived as being more likeable by the consumer, due to the perception of popularity (De Veirman, et. al., 2017). They refer to their following as ‘followers’ instead of ‘fans’, this obscures the power and status differences and social distance with in the relationship (Abidin, 2016). This helps them appear more approachable and trustworthy, they appear ‘normal’.

 

Picture of a travel themed Instagram account.

Image: Fancycrave, Pexels, Pexels License.

 

Many features enable this most notably ‘swipe up’ in stories. This allows a user to swipe up on a video to go straight to a website. Instagram also allows websites to be put into bios, this connects the brands image to their product/service.

 

With social media easily enabling, and business’ shifting the focus of advertisements, Instagram has played a major role in transforming the world of marketing and advertisement. A whole new sector of advertising has been born out of this; print, tv, social media. Social media is now dominating the sector, really changing the focus of the marketing industry.

 

This is due to the personalisation that can be achieved through social media. Through data collection new algorithms have been built to target advertisements to those who are more likely to be interested. Sameera Inapakutika led the company wide initiative to make Instagram ads highly relevant to its users, an effective feature for its advertisers (Reddy, 2016).

 

Business can also choose to have run a business account compared to a personal account, allowing for contact information to be accessible from Instagram and analytics of all posts to be tracked. An account can also pay money to become sponsored, which distributes the posts into random, but calculated, users feeds via the algorithm.

 

It is clear that Instagram is shifting its business model to be more business minded to gain more revenue from advertising, and its working. Instagram has brought in almost $7 million in revenue this year (Statista). It is estimated that by 2020 Instagram will bring in $22 billion in ad revenue and make up a quarter of Facebook’s total ad revenue (Krause, 2018).

 

The ecology of Instagram

 

Like all business’, Instagram has its competitors. Looking at the ecology web of Instagram we can see how Instagram functions alongside its support network and competitors. An ecological perspective looks at the relationships and dynamics between various participants within a field (Looi, 2001).

 

Instagram dominates the photo sharing app market, and is emerging as one of the biggest digital marketing company in the social media sector. Its biggest competitor Facebook saw this emerging rivalry and took the chance to buy Instagram essentially eliminating competition between the two platforms.

 

Twitter and Pinterest are big threats to Instagram. Advertisement takes place on both platforms through a ‘promotional’ feature. This is much like sponsored posts on Instagram; placing post into random calculated feeds. YouTube is highly competitive as another visual media platform. Advertisements are shown before videos and through influencers. Many business’ are looking increasing their YouTube presence to reach more customers.

 

Due to the large dealings Instagram has with advertising, Instagram is also in competition with traditional marketing strategies, including print and television. Magazine ads, billboards and TV commercials are all competitive to the advertisement offered on Instagram.

 

The core suppliers of Instagram are business’ wanting to advertise, who use Instagram to promote their product or service through sponsored posts and stories. These business’ also in turn become users with their own profiles contributing to the feeds. The general consumer is vital for Instagram’s success as they are the audience that add value to Instagram advertisements. The user base is what Instagram supplies to advertising business’.

 

Instagram is partnered with 50 consultancy business’ which are experts in digital marketing, including CitizenNet and Kenshoo. This partnership connects advertisers on Instagram with one of these consultancy companies to work together and better the performance and outcomes of the companies’ ads on Instagram (Instagram Business, 2016). This ensures the companies digital marketing centres around Instagram.

 

The diagram below illustrates the ecology of Instagram.

 

 

Instagram’s transformative Power in Business

 

Instagram has developed a more effective, faster, cheaper way for business’ to advertise. This has in turn transformed the way business’ advertise as well as questioned the effectiveness of traditional advertising methods. The sector of advertising has completely changed with digital media dominating the market.

 

Over 2 billion people use social media world wide and half of those are active users of Instagram. Due to this there is now a new form of customer, the always connected consumer (Shih, 2016). With Instagram’s algorithm distributing advertisements effectively, its never been easier for a business to reach a prospective customer. Business’ are aware of this and they are not missing out. Instagram now has 2 million monthly advertisers (Instagram Business, 2017).

 

Instagram is dominating the digital advertising and the advertising field at large because it is faster as companies can easily create their own advertising content and publish it with in seconds. It is cheaper because third parties can be irrelevant to the process. It also creates a bond between consumer and business that feels more genuine and connected; more personable.

 

Instagram is effective through algorithmic distribution resulting in better advertisement targeting. The algorithm ensure that the advertising content appears in users feeds which have shown an interest in similar things. This largely increases the likelihood of user engagement and sales. This is a major selling point for potential advertisers however has come at a cost for users trust.

 

Users are not happy about the tracking of information that results in targeted advertising questioning its ethics and privacy breaches. One study even found that these targeted ads manipulate consumer’s emotions rather than simply present the product and information regarding that (Vassallo, 2018). It has been said in the future, we’ll all have our 15 minutes of privacy (Qualman, 2009).

 

Instagram has now made it mandatory for all sponsored posts to be labelled as such as for Influencers to label their paid promotional posts as a “paid partnership” (Jarvis, 2017). This was introduced to increase the transparency with its users. Instagram needs to ensure the comfort of users to keep them active on the app because without active users advertisement revenue will plummet.

Picture of someone about to make an Instagram post.

Image: Omkar, Pexels, Pexels License.

Business’ have changed business models, reallocated funds and started whole new departments in favour of digital advertising. Instagram is only making it easier for these business’ to use their tools and advertise through this platform.  This opportunity and relationship is unique and effective because it capitalises on the attention economy.

 

The attention economy positions attention as the most valuable commodity as it is stretched between all the informational demands we have in current online driven society. Due to this Instagram is capitalising on the glance. Instagram have constructed their app in a way that encourages users to view and post images with the primary mode of viewing, being a glance, in mind (Zulli, 2018).

 

It is set up to have a continuing scroll which allows the views to rhythmically glance at every image. This basically ensure that the user will view the sponsored post in their feed because it fits with in this routine and can be absorbed in that glance. Capitalising on the attention economy is arguably what has caused the positive engagement Instagram is receiving with advertising.

 

This type of advertisement will more than likely phase out traditional methods due to how much more effective it is and how much more attune it is with the current attention economy. In the future more advertisements will be more targeted then ever before but alongside this, more effective than ever before. More work needs to be done however on the ethics of this because in the end it is all dependant on consumer comfort of the system.

 

Summary

Instagram had a huge platform comprised of the public and used this opportunity to provide advertisements. Instagram has become one of the easiest platforms for business’ to advertise from with benefits ranging from more effective posts, to cheaper production, to faster approaches. Instagram is pioneering in the digital advertising sector which is steadily overtaking traditional advertising methods due to working with the current attention economy. The way business approach advertisements have now completely transformed. Instagram now needs to focus on keeping its product (the public) happy and available.

 

 

Reference List 

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Colliander, J., & Marder, B. (2018). ‘Snap happy’ brands: Increasing publicity effectiveness through a snapshot aesthetic when marketing a brand on instagram. Computers in Human Behavior, 78, 34-43. doi: 10.1016/j.chb.2017.09.015

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Krause, R. (2018). Facebook to garner one-fourth of ad revenue from instagram by 2020. Investor’s Business Daily Retrieved from: http://ezproxy.library.usyd.edu.au/login?url=https://search-proquest-com.ezproxy1.library.usyd.edu.au/docview/2053074636?accountid=14757

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Edwina Biggs
About Edwina Biggs 3 Articles
Digital Cultures Major at the University of Sydney.

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