Image source: Instagram.
Ever since Facebook (FB +0.23%) purchased Instagram, the social media giant has been slowly morphing the photo and video sharing app's business model to look more like its own.
And the latest change came this week when Instagram announced that it will soon have sponsored posts and business profiles.
The sponsored posts will work how nearly every other sponsored posts on social media work: companies or brands can pay to have one of their photos or videos placed more prominently in front of users.
One of the major changes this brings for companies is that they'll now be able to change regular posts into ads. Before, an advertisement was just that, an ad, but now a popular post can become an ad if it's proving to be popular among a brand's followers.
The new business profiles will work similarly to Facebook Pages, with the ability for Instagram users to click a button to call, text, or email a company.
And both of the changes could boost ad spending on the platform.
Why the changes are good for Instagram
Business profiles are a logical move for a platform, which is already widely used by many brands, and the feature will also include more analytics for the companies.
Here's what Instagram said in blog post:
Insights on Instagram give businesses actionable information about who their followers are and which posts resonate better than others -- all from within the mobile app. By learning more about the behavior and demographics of your audience, you can create more relevant and timely content.
The more data companies have about their posts (like what time of the day posts are most popular) should translate into brands being more willing to spend money promoting posts, or just adding more ads in general.
Instagram says the promoted posts can be targeted to a specific audience of the brand's choosing, or Instagram can suggest the targeting it thinks is best.
What Facebook stands to gain
Instagram has become a core part of Facebook's overall revenue over the past few years. Facebook doesn't break out Instagram revenue specifically, but ads from the platform are estimated to bring in $1.53 billion for Facebook this year, which would equate to 15% of Facebook's total ad sales, according to eMarketer. And those ad numbers are expected to climb to $2.8 billion by next year.
Instagram is rolling out the new business profiles and promoted posts slowly, starting with a U.S. launch this month, followed by New Zealand and Australia later, and finally worldwide by the end of the year.
The new features should be a welcomed move by advertisers, and could help Facebook continue to build out one of its strongest assets. Investors will have to wait at least a few quarters to find out if the changes bring any significant bump in revenue to Facebook's bottom line, but they should be pleased that the social media juggernaut is using its experience on the Facebook platform to fuel new areas of growth in its other businesses.
