Why There Are So Many Ads on Social Networks

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Source: Blog.business.instagram.com

Facebook has long been covered in ads of all shapes, forms, and sizes. But you’re soon going to be seeing advertising everywhere when it comes to your favorite social networks, and the rise of ubiquitous advertising is one trend that’s not going away any time soon.

Vindu Goel and Sydney Ember report for The New York Times that while Facebook has kept Instagram mostly free of advertising since acquiring the photo-sharing app in 2012, the company just announced its plan to open your Instagram feed to all advertisers later this year. “To give all businesses the opportunity to reach the right people, we are working to make Instagram advertising available through an Instagram Ads API and Facebook ad buying interfaces over the coming months,” the post on Instagram’s blog reads. “We will start by opening the Instagram Ads API to a select group of Facebook Marketing Partners and agencies, and we plan to expand globally throughout the year.”

Goel and Ember note that Instagram offered its first ads in November 2013, but since it’s been “subsidized” by Facebook, that’s given it time to develop an advertising strategy. As the API becomes available, marketers will be able to target ads to Instagram 300 million plus users by interest, age, gender, and other factors, reaching people with the demographic traits that make them likely customers exactly as they can when advertising to Facebook users. Instagram will also begin testing a type of ad that enables viewers to click on a link to buy the product or install the app that’s advertised.

The Times notes that the commercialization of Instagram’s photo-sharing app, while disappointing to users, was inevitable. That’s because major social networks, including Facebook, Twitter, and Pinterest, are keeping their services free for users, and that means turning to advertising to support their operations.

Instagram’s advertising expansion has been expected by both marketers and investors, who see the company bringing in plenty of ad revenue from brands eager to target its young, highly-engaged user base. RBC Capital Markets estimates that Instagram ads could add $1.3 billion to $2.1 billion to Facebook’s revenue this year alone, even as analysts question the effect that unexpected ads could have on Instagram’s user experience. But brands are eager to reach exactly the type of young, high-income user that’s increasingly leaving Facebook — now the realm of middle-aged mothers — and joining Instagram. The expanded advertising options indicate that Facebook is getting serious about making money from Instagram.

Though Instagram has about the same number of users as Twitter, Instagram has been much slower than Twitter, Facebook, and other major players in allowing ads on its network and building targeting tools to help marketers reach potential customers. Google last month began testing a tool that enables YouTube users to buy a product from within a video, and Pinterest recently announced that it will enable sellers to add a “buy” button to items they post to the site.

Mashable’s Seth Fiegerman notes that the multitude of social networks building e-commerce into their business models are motivated by a couple of different factors. These companies are both looking beyond the ability of traditional ads to grow their revenue, and looking to monetize their unique ability to use the data they can glean from users’ shopping experience to better target ads and to prove the return on investment to marketers.

Gartner analyst Brian Blau told Mashable, “Commerce is that logical next step beyond advertising, and the biggest players can attract the most desirable brands as long as that purchase journey fits well into existing user experiences.” Blau notes that the “ecosystems” necessary to integrate commerce into social networks weren’t in place until recently, Fiegerman points to the success of Stripe, the payments processing service that handles the back-end tech for commerce features on Facebook, Twitter, and Pinterest. Stripe wasn’t founded until 2010, and has only really begun to take off recently.

But as they experiment with various forms of advertising, each social network will need to negotiate a tough balance between building a sufficient commerce presence to bring in revenue and still maintaining a user experience that doesn’t feel disrupted or fragmented by the new ads. And while each will look to implement ads and commerce solutions that make sense for its particular user base and user experience, it seems very likely that a buy button will soon show up just about everywhere you look.

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