TECHNOLOGY

Instagram to Open Its Photo Feed to Ads

By VINDU GOEL and SYDNEY EMBERJUNE 2, 2015

A mock-up of an ad from the Tieks brand on Instagram.

Instagram is cranking up its money machine, and that means a lot more ads in your photo feed.

Facebook, which bought Instagram in 2012, has kept the mobile photo-sharing service mostly free of advertising, allowing only a handful of big brands to put a few carefully drafted commercial messages on the service.

But on Tuesday, the company announced plans to open the Instagram feed to all advertisers, from the local tattoo parlor to global food makers, later this year. Marketers will be able to target ads to the service’s 300 million users by interest, age, gender and other factors, just as they can on Facebook.

Instagram will also begin testing a type of ad that allows viewers to click on a link to buy a product or install an app that is advertised.

The commercialization of Instagram, while sure to disappoint some users, was probably inevitable. Major social networks like Facebook, Twitter and Pinterest have committed to keep their services free to users, and they have turned to advertising to pay the bills.

The expanded advertising options signal that Facebook is becoming serious about making money from Instagram, which has a younger audience than the main Facebook social network.

Instagram offered its first ads in November 2013, but since it has been subsidized by Facebook, it has had time to develop an ad strategy.

The advertising expansion has long been anticipated by marketers and investors, who see big money for Facebook and the brands in ads shown to Instagram’s users — a generally young, passionate group who share, like, click and comment on posts at a much higher rate than users of other services, including Facebook.

One Wall Street firm, RBC Capital Markets, has estimated that Instagram ads could bring in $1.3 billion to $2.1 billion in additional revenue to Facebook this year alone, depending on how quickly its new ad offerings are introduced.

Consumer brands and retailers have been particularly eager for an easy way to lead people who, for instance, like an Instagram photo of a pair of ballet flats, to a place where they could buy the shoes.

Right now, that experience is clumsy, especially on mobile phones, when users are forced to cut and paste a link into their browsers or search for the shoes on a retailer’s site.

“It’s not fun as a user and hard to track as a brand,” said Kfir Gavrieli, chief executive and co-founder of Tieks, a Los Angeles maker of foldable ballet flats that sells its wares entirely online. Mr. Gavrieli, whose company has about 400,000 Instagram followers, was briefed by Facebook on the coming changes and said he was eager to try the company’s new targeting and click-to-buy options.

Nevertheless, increased advertising could also turn off Instagram users. The service’s founder, Kevin Systrom, who still runs the service within Facebook, built it to be a place to relax and appreciate beautiful photos and videos posted by people and companies that users have chosen to follow. When Facebook bought Mr. Systrom’s company for $1 billion, Mark Zuckerberg, Facebook’s chief executive, said he wanted to preserve that experience.

Filling the feed with unexpected ads from random companies could alter that.

“It’s not necessarily going to be the beautiful imagery that fans are used to, ” said Debra Aho Williamson, a principal analyst at eMarketer, who was briefed in advance about the company’s plans. She cited the infamous Facebook ads promoting belly-fat reduction as an example of “ugly” ads that could soon show up in Instagram feeds.

Instagram insists that it is treading carefully to balance the desires of its advertisers and its users and does not want to appreciably change the user experience.

“Visual storytelling for brands has more resonance. People remember it more,” said James Quarles, Instagram’s global head of business and brand development. “But we want to make sure the ads they see are for things that matter to them.”

Instagram has roughly the same number of users as Twitter. But Instagram has been much slower than Twitter and its own sister network, Facebook, in allowing ads on the service and building sophisticated targeting tools to help marketers reach potential customers.

Google has also been creative. Last week, for example, it began public testing of a tool that allows people to buy products from within a YouTube video. And Pinterest, another growing social network, said Tuesday that it would allow sellers to add “buy” buttons on items they post to the site.

Instagram has “taken it in a very gradual way to maintain as much of the purity of the environment as they can,” said Brian Wieser, a media analyst with Pivotal Research.

Collectively, the expanded advertising options signal that Facebook is becoming serious about making money from Instagram, which has a younger audience than the main Facebook social network, whose core users are middle-age mothers.

“Who are brands obsessed with? High-income teens and people in their 20s,” said Scott Galloway, a New York University marketing professor and chairman of L2, a research firm that studies how consumer brands use social media. “Those people are leaving Facebook. Where are they going? Instagram. Facebook has shored up its rear flank with this important cohort with Instagram.”

There is little doubt that Instagram is a powerful storytelling platform for marketers. But so far, most of them have not advertised on the service but instead have used it for more subtle forms of marketing.

The Oreo cookie brand, for example, just finished “Tiny Tasty World,” a campaign on Instagram, Facebook and Twitter that turns Oreos into miniature life scenes. In one, tiny people lounge on beach towels that rest on top of a golden Oreo in the sand. That post drew nearly 25,000 likes and more than 200 comments on Instagram.

“The visual style really resonates with people,” said Kerri McCarthy, a brand manager for Oreo North America.

So far, Oreo has only posted images on its Instagram account and has not paid for advertising, Ms. McCarthy said. While that has been successful — since December, the size of Oreo’s audience has doubled to roughly half a million followers — paid advertising could further increase the brand’s reach.

That opportunity to reach people who are not yet fans but have the demographic traits that make them likely customers is part of Facebook’s appeal to advertisers.

And over the coming months, the company says, it will bring that targeting to Instagram, which could appeal even to brands with large numbers of followers.

GMC, the truck brand of General Motors, for example, uses such targeting to advertise on Facebook to potential truck buyers, a group it has identified through outside marketing data as well as Facebook’s data about its users.

By contrast, the automaker’s first Instagram ad, a panoramic experiment that made its debut last week, was sent to all American Instagram users ages 25 to 54.

“Instagram, at this point, doesn’t have the level of sophistication that Facebook has,” said Janet Keller, GMC’s marketing director. “Ideally, down the road we would have access to a lot more targeting and filtering.”

Mr. Quarles of Instagram was much more cautious about promising the other feature that advertisers really want: the ability to embed a link in a post so that interested viewers can click to buy a product or learn more.

Instagram will begin testing such “call to action” buttons soon, but only in ads and only in Spain, Mr. Quarles said.

“Our sense is that the time from being inspired to making that purchase is probably a longer one than a single session on Instagram,” he said.

Retailers would beg to differ.

Many of them already use third-party workarounds, such as Curalate’s Like2Buy tool, to allow fans to shop their Instagram feeds. Visitors to the Instagram pages of Target, Nordstrom, Forever 21, Williams-Sonoma and other retailers can click on a special link that the store posts in its account description that leads to a mirror image of its Instagram feed — but one where photos are clickable and link to product pages where a shopper can buy the items.

“We have a lot of marketers who post beautiful photographs, and it’s inspiring, and it causes people to want those products,” said Apu Gupta, chief executive of Curalate.

Instagram’s lack of product links has not only frustrated marketers, he said, “it’s frustrated consumers, too.”