Call it a #marketingram? In-stream ads are coming to Instagram accounts in Canada.
Facebook Inc. has decided it's time that the popular photo-sharing network, which it snapped up for about $1-billion in the spring of 2012, starts making some money from its users in Canada, Britain and Australia.
Instagram has already been placing "sponsored" ads in U.S. users' streams since last year, which marked the company's first step to monetize its rapidly growing user base. Canadians can soon expect the same, likely in the third quarter of this year, according to an announcement on Monday.
Ads have become commonplace on other social apps like Facebook and Twitter, which target pitches to users based on their activity and preferences. But Instagram had, until recently, stayed pristine, showing its customers only the content from those they choose to follow. The new ads will target users based on which accounts they follow and which photos and videos they like, as well as interests and "basic info" gathered from Facebook profiles.
Following the template of last year's launch into U.S.-based advertising, Instagram plans to move slowly, inserting only occasional posts from high-profile brands into Canadian streams. The company also plans to use measurement campaigns to track the unavoidable backlash expected from some users.
"There is risk" in introducing ads, said Mark Mahaney, a managing director and analyst at RBC Dominion Securities Inc. If it is done too quickly, it could damage engagement. But he thinks Facebook's track record with advertising, along with Instagram's size and rapid growth, are reasons to believe the ads can work.
"I think they've proven that people are willing to tolerate and, sometimes more than that, embrace ads that are relevant, that aren't put too frequently within their conversational stream," Mr. Mahaney said.
Expanding ads to more countries will be key to generating revenue from Instagram, as 60 per cent of the 200 million people on the network are located outside the U.S. With 55 million photos posted every day, Instagram has grown quickly of late, even outpacing Facebook's expansion at a similar point in its maturity.
Facebook has yet to reveal which companies will be first to place photo ads in Canada. Global labels already promoting themselves to American users include Ben & Jerry's, Lexus and Levi's, but Canadian companies are also likely to get involved. Canadian Tire and Sportchek are currently two of Facebook's most important ad partners north of the border.
The company is keen to work with brands that will be creative with their images to keep from turning users off, and is including an option to hide individual ads users no longer want to see.
"We want someone to feel like they're flipping through their favourite glossy magazine," a Facebook spokesperson told The Globe and Mail.
It is difficult to gauge how much revenue the new ads might bring in. In an announcement on the company blog, Instagram said the results for its advertisers had been, "in some cases, well above the ad industry's average for performance." And earlier this year, Instagram reportedly signed a $40-million deal with global ad firm Omnicom Group Inc., according to Adweek.
At the same time, Facebook has dampened expectations, cautioning investors that "we cannot assure you that these ads will generate meaningful revenue for our business" in its latest annual report.
"But I think there's widespread belief that Facebook has a highly monetizable asset in Instagram," Mr. Mahaney said.