How Does Instagram Make Money?


Quick Answer

As of November 2014, Instagram makes money through mobile advertisements and 15-second video promotions from companies such as Taco Bell and Hollister. Facebook has not been forthcoming with its plans for the photo-sharing site, although industry experts claim mobile ads on applications are the way to go for Instagram. The reason for focusing on mobile apps is that so many people share photographs from smartphones directly to social media websites.

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Full Answer

Business Insider predicted in October 2013 that Instagram advertising could reap $340 million in 2014. Instagram started a pilot project with advertisers in late 2012 to determine the best course of action to make money.

Facebook signed a deal with Omnicom for $100 million in March 2014. After the deal, Instagram advertisements came in high-quality photographs or streaming videos. Omnicom specializes in targeted advertisements and measuring the company's return on its advertising investment through Instagram accounts. Long-term partners using this service through Instagram include Ben & Jerry's, General Electric, Michael Kors, Lexus and Levi's.

The general idea is to rival Twitter's mobile advertising revenue, which exceeded $224 million in the fourth quarter of 2013. Instagram needs to convince companies to pay for advertising space on a "cost per thousand" basis, which means Facebook must determine how much it charges for 1,000 advertising impressions.

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