Proof That Instagram Ads Are Working

Analytics company Nitrogram did some number crunching on the very first Michael Kors Instagram ad and found the campaign to be wildly successful in terms of engagement, total reach, and followers gained. It's looking like Instagram ads are going to be a hit with marketers, which could ultimately be an added bonus for Facebook's (NASDAQ: FB  ) growth prospects.

In a blog post, Nitrogram compared the average number of likes, followers gained, and total reach on five recent normal Michael Kors posts against its sponsored counterpart. Compared to the baseline, the paid ad's number of likes increased by 370%, distribution increased by 238%, and the American designer gained 16 times more followers than usual, all within 18 hours. Instagram ads work.

Surprisingly, non-sponsored Michael Kors posts carried a lower conversion rate than the paid ad, meaning the number of likes relative to the size of the distribution was a lower percentage. This could be a function of Instagram's ability to effectively reach desired target audiences that aren't yet Michael Kors followers, or the quality of the ad was superior to the baseline posts, or some combination of both. Considering that Instagram wants to emphasize high-quality magazine-style ads on its platform and this was its first crack at monetization, I suspect quality played a larger role than usual.

Undoubtedly, if Instagram can build upon this success, sponsored ads will likely be a great way for brands to connect with a larger audience in an efficient manner. From the marketer perspective, it seems to be a worthwhile investment because it gives them an opportunity to quickly grow their following, which can pay dividends over the long term.

As far as Facebook is concerned, let's hold off on our enthusiasm until we see more evidence suggesting that Instagram is a great place for marketers to be. That said, Facebook will still likely to be able to command a similar run rate on its Instagram operations as it does from its core mobile ad business. Applying those figures to its monthly active user base of 150 million, Instagram has the potential to be worth upwards of $600 million a year in revenue, and perhaps even more if its effectiveness and quality translates to a higher level of engagement.

At the end of the day, marketers have a knack for following engaged audiences. If Instagram can keep it up and prove its worth, it likely has a promising future in the ad business.

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