Instagram introduced new tools for companies last summer to help businesses get better insights into their audiences and make it easier for those audiences to connect with the companies.
In less than 18 months, 25 million businesses have created a business profile on Instagram. That's up from 15 million in July. In comparison, Facebook (NASDAQ:FB), Instagram's parent company, has 70 million Pages on its flagship platform.
We can attribute much of Instagram's success courting advertisers to its relationship with Facebook (and its 6 million active advertisers). But Instagram revealed an interesting detail in its recent announcement: one in three businesses on Instagram started on Instagram. That group presents a massive opportunity for Facebook.
Three times the size of Twitter
It's been a while since Twitter disclosed the number of businesses on its platform. In fact, I've only found the disclosure one time. Last year, Twitter said it identified 9 million businesses on its platform. At the time, it only had around 130,000 active advertisers. Considering the slow user growth and decline in ad revenue at Twitter over the past year, it's unlikely either of those numbers have changed very much.
That should provide an idea of just how big 25 million active advertisers is. One-third of native Instagram businesses is nearly the same size as Twitter's entire business user base.
That should also provide an idea of just how big the revenue opportunity is for Instagram. Twitter expects to bring in around $2 billion in ad revenue this year with 330 million monthly active users and significantly fewer advertisers and potential advertisers (i.e., non-advertising businesses on the platform). Not to mention Instagram users are much more engaged than Twitter users.
The opportunity of native businesses
Around 8 million of the 25 million businesses on Instagram started out on Instagram. These businesses likely have less presence on Facebook or any other social network as they've been able to build a brand around their Instagram profiles. That presents a fresh opportunity for Facebook to expand its advertiser base.
Last year, Instagram introduced new tools to allow businesses to display more information about products in their Instagram photos. Its ad products have also expanded to more verticals, offering opportunities for many different kinds of businesses.
Continuing to cater to brands that primarily operate through Instagram could help Instagram not only differentiate itself from competing platforms like Twitter, but it can differentiate itself from its parent company as well.
It's likely most of Instagram's advertisers are coming from Facebook, especially as ad load constraints send them looking for better returns. But the opportunity to onboard advertisers from its native businesses is just as great if not more so considering the specialized needs of those businesses.
An avenue for continued growth
Advertising on Facebook's flagship platform is entering a new phase. After reaching ad load saturation, Facebook continues to see increased demand for its ad products. As a result, ad prices are climbing much faster than in the past. But that's an unsustainable trend.
Instagram is an avenue for growth at Facebook while the parent company figures out several initiatives it's been working on, including video, monetizing its messaging platforms, virtual reality, and more. For now, Instagram is its biggest growth driver.
Instagram's ability to attract more and more businesses and its ability to cater to the unique needs of the businesses on its platform should provide investors with confidence in Facebook's ability to keep both the top and bottom lines moving in the right direction.