B&E | Instagram adds Advertising to Instagram Stories

The social media company will become a more important player in maintaining Facebook's growth in advertising revenue in 2017.

By Tim Baysinger

Image Attribute: Instagram User / Pixabay / Creative Commons Zero

Jan 11 (Reuters) - Facebook Inc's Instagram is bringing more than 30 advertisers into one of its fastest-growing features, Instagram Stories, in a bid to boost advertising revenue, the company said on Wednesday.

The social media company will become a more important player in maintaining Facebook's growth in advertising revenue in 2017. During the last two earnings calls, Facebook executives said they may soon reach a limit on a number of ads they can place in front of users, which had been one of the key factors driving ad revenue growth.

Instagram is expected to generate $3.64 billion in worldwide ad revenue this year, nearly double that of 2016, according to eMarketer. That would represent 12.3 percent of Facebook's global ad business, up from 8.4 percent in 2016. In the United States, eMarketer said it expects Instagram to account for more than 20 percent of Facebook's ad revenue.

eMarketer also found that 74 percent of U.S. companies plan to use Instagram this year, up from 53 percent in 2016. This level of use would allow Instagram to surpass Twitter.

Media buyers are optimistic about Instagram's ability to maintain Facebook's place, second only to Alphabet Inc's Google, in the digital ad marketplace. "Instagram could end up being as strong a revenue component for Facebook as YouTube has been for Google," said Noah Mallin, head of social for ad agency MEC Wavemaker.

In Instagram Stories, users and businesses can post a string of photos and videos that disappear after 24 hours. It launched in August and now has 150 million daily active users, according to Jim Squires, director of market operations for Instagram.

The new ad product will show full-screen ads intermittently as users swipe through photos and videos on Instagram Stories. The company is testing it with major advertisers including General Motors Co, Nike Inc and Airbnb, which is using it to promote its product Trips on Airbnb.

Time Warner Inc's Turner Sports will test ads for cable network TNT's airing of next month's National Basketball Association All-Star Game in New Orleans.

Companies normally test new advertising products with a select group of advertisers to work out any kinks before a wide roll out.

According to eMarketer, 74 percent of U.S. companies plan to use Instagram this year, up from 53 percent who used it for marketing in 2016. This level of use would allow Instagram to surpass Twitter.

"It's definitely gained importance," said Ian Schafer, founder, and chairman of ad agency Deep Focus, who said he plans to spend more money with Instagram.

The past few months have seen Facebook admit to a variety of errors in how it has measured performance for brands that advertise on the platform. Buyers do not expect that to hurt Instagram's efforts.

"They just have such a monopoly when it comes to attention that it's difficult not to have to go that route," said Victor Piñeiro, senior vice president social media for digital agency Big Spaceship.

(Reporting by Tim Baysinger; Editing by David Gregorio)

(c) 2017 Thomson Reuters