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STRATEGY

Inside Instagram's Ad Rollout Strategy

At first, the thought of ads on Instagram made users want to leave. Then the company got them excited.

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Instagram users were none too pleased on October 3, when the company announced its long-rumored plan to introduce paid, targeted advertising into users' feeds. Up until then, the Instagram accounts of businesses had looked exactly like those of other users, with the same sepia-toned filters and hashtagged captions. Now, users said that their beloved social network felt tainted. 

The outcry from active users was similar to that of December 2012, when Instagram revamped its Terms of Service to suggest that advertisers might have access to users' photos and even be allowed to rebrand them as their own. This prompted many users, including National Geographic and the hacktivist network, Anonymous, to boycott Instagram.

Instagram eventually moved on from that PR debacle (and retracted its Terms of Service changes), but founder Kevin Systrom and his team realized that if Instagram was going to introduce advertisements, users would need time to get acquainted with the plan. This meant abiding by three core principles: community first, simplicity, and being inspiring. 

"It’s very important for Facebook that Instagram have happy, active users on that service," says Clark Fredericksen, a spokesperson for eMarketer, a digital research firm. "They’re what is keeping the company's lights on. We expected Instagram to be deliberate and cautious in its rollout of ads. We didn't expect to see the volume of ads that you see in Facebook’s news feed."

To that end, Instagram embraced a slow-moving campaign, one that successfully made users more comfortable with the idea of seeing paid ads in their feed. On Thursday, October 24, the company confirmed the ads were coming and offered what felt like a sneak peek of what the ads might look like, using a photo taken in-house. The actual ads wouldn't appear for another week. 

"You’ll know a photo or video is an advertisement when you see the 'Sponsored' label where the time stamp normally would be," the blog said of the content. "Tap this label to learn more about how advertising works at Instagram." The message was clear-cut and effective, thanks to its reassuring tone--"As always, you own your own photos and videos"--and gentle reminder that users were still a "part of the Instagram community."

Judging by the mock ad itself, which featured a man seated at a long wooden table, cup of coffee in one hand, smartphone in the other, it was clear the company had created its own set of guidelines for how ads should appear. It was stylish, well-composed, and Instagrammy. Popular brands like Ben & Jerry's, General Electric, and Burberry already got this aesthetic and clearly their Instagram followers appreciated it, but how would non-followers receive the intrusion? 

On November 1, Instagram got its answer via responses to Michael Kors' first sponsored post. The sumptuous image--featuring candy-colored macarons and a striking gold watch--elicited no shortage of complaints from people who hated fashion and ads in general. It seemed the next step for Instagram, then, would be finding better ways to target the ads, though that would take trial and error. 

For now, the company could bask in its initial post's success. Despite all the cries to "JUST STOP" with the sponsored ads, the Michael Kors Instagram ad received more than 98,000 likes within the first four hours, according to Fortune, and 218,000 likes within 18 hours, far more than Michael Kors Instagram photos typically received.  

According to a report by Nitrogr.am, the engagement rate actually represented a 370 percent increase from Michael Kors' normal rate, which typically hovers around 3.57 percent. Even better, the fashion brand drew 33,985 new followers on Instagram, 16 times more than it garnered with recent posts. 

Other sponsored ads, which featured Taco Bell, Ben & Jerry's, and General Electric, earned hundreds upon thousands of likes, thereby cementing their place in those brands' ad campaigns and Instagram's ongoing efforts to be profitable. 

Instagram still seems to be finding its footing in the advertising space, and now that the company is part of Facebook, a publicly traded company, it will certainly have to generate more revenue keep shareholders happy. Currently, the ads offer no functionality to deliver a direct return on brands' investment, either through e-commerce or another shopping platform. 

"If I was the Gap or another clothing retailer, I'd pay $25,000 a month to have a pro account where I could post photos that can directly lead people to buy that item," Benjamin Palmer, co-founder and chairman of The Barbarian Group, which works with brands like GE, told Fast Company. "It would’ve been cooler if they put a store in there or a shopping platform. That would’ve been an innovation instead of an interruption."

For now, though, Instagram's slow-and-steady ad strategy seems to be working. "They have the cool factor right; Instagram is a hot platform," says Fredericksen. "And while Facebook is clearly looking to make money from it, they don't want to alienate users by overwhelming them with ads. It's very important to keep them happy." 

IMAGE: Instagram image via Ben and Jerry's
Last updated: Nov 19, 2013

JILL KRASNY is the associate editor for Inc. Previously, she was editor at Business Insider and has held positions at TheStreet and Reader's Digest. Krasny is a graduate of the University of Southern California, holding a degree in communication.
@jillkrasny




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