A Blog by Jonathan Low

 

Jun 22, 2016

The Significance of Instagram's Attaining Half A Billion Users

Concentration and scale - enhanced by Instagram's relationship with Facebook - has led to exponential growth.

This may become a model for future expansion of web enterprises. JL

Kathleen Chaykowski reports in Forbes:

The app has more than doubled its user base over the past two years. It added its latest 100 million users faster than the previous 100 million. Facebook has been key to the app's success. Instagram will generate $1.5 billion in global advertising revenue this year, representing 8.4% of Facebook’s net mobile ad revenue.
Instagram now has more than half a billion monthly active users, putting the popular photo-and-video sharing app in a small, elite class with the likes of Facebook, WeChat and Facebook-owned Messenger and WhatsApp.But Instagram’s CEO Kevin Systrom said the five-and-a-half-year-old company has been so heads-down it had to remind itself to celebrate.
“500 million is a milestone very few companies get to,” Systrom said in an interview at the company’s Menlo Park, Calif. headquarters. “This scale is not a badge on our uniform, but a signal of our ambition. If we can have a billion or a billion and a half on Instagram, we get closer to capturing every experience in the world.”
Instagram was viewed as expensive when Facebook purchased it for $1 billion in 2012, when the startup had 13 employees and fewer than 22 million monthly active users. Now, the app has more than doubled its user base over the past two years, the company said. Instagram launched in 2010 and has become one of the fastest-growing apps of all time. It previously hit 400 million users in September and added its latest 100 million users faster than the previous 100 million.
Instagram also announced it has more than 300 million daily active users who use the service to socialize with friends, as well as to follow interests ranging from fashion, to basketball, cheese shops, dance, surreal landscapes, abandoned urban centers and latte art. The app has more than 100 million monthly active users in the U.S. alone, and more than 80% of users live outside of the U.S.
“It’s grown to be very global, which I believe comes from the fact that images are a universal language,” Systrom said, noting that the spread of Internet access and mobile devices has also propelled the app’s growth. “It’s not just photographers or tech mavens in Silicon Valley using it.”
Systrom cofounded Instagram in 2010 with CTO Mike Krieger, a Stanford classmate. Instagram started as a niche photo-sharing app for photographers and hipsters and quickly grew into a massive cultural phenomenon, part of a larger social media movement that has brought sharing power to individuals, not just organizations.The app is teeming with millennials, celebrities and high-profile public figures. The pope joined Instagram in March, and actress and singer Selena Gomez has the app’s most followed-account with more than 85 million followers. Every day, users spend an average of 21 minutes in the app and collectively share more than 95 million photos and videos per day on average.
Since Facebook acquired the app, Instagram has leveraged the social media giant’s talent and infrastructure to grow both its user base and advertising business. Systrom said being part of Facebook has been key to the app’s success, along with the company’s early focus on mobile photography and fostering community.
Instagram’s “asymmetric follow graph” lets users follow others without making a friend request. Users rally around diverse sub-communities on the app around topics like Airstream trailers, skateboarding or pet ownership. These deep “interest graphs” help set Instagram apart from other mobile apps like Snapchat and Pinterest, Systrom said.
“We blew up that assumption and said there is a whole world of behavior around letting everyone see your photos,” Systrom said. “I don’t have to request you as a friend to see your photos. That’s Instagram’s super power.”
As Instagram’s influence has soared, so has its young advertising business. Since November, Instagram has grown from having hundreds of advertisers to more than 200,000 marketers, from large financial firms to small artisan jewelers, across more than 200 markets. Forecasting firm eMarketer estimates Instagram will generate $1.5 billion in global advertising revenue this year, representing 8.4% of Facebook’s net mobile ad revenue. In 2018, eMarketer predicts Instagram’s ad revenue will total $5.1 billion globally, 18% of Facebook’s net mobile ad revenue.
60% of users says they have learned about products or services on Instagram, a recent Facebook study found, and 75% of users take an action such as clicking a link, doing a search or telling a friend about a product after being inspired.
“We often heard in user studies that people would call Instagram their daily meditation,” said Instagram’s global head of business and brand development James Quarles. “Your openness to discovery to learn about lots of new things through Instagram is a natural part of why people come to their feed.”
“As a business, you think, ‘Consumers are on their mobile devices. Where can I find this receptivity towards well-crafted marketing messages?’” he added.
Instagram’s patience in rolling out ads, which it started testing in 2013, has paid off. Instagram has also benefitted from access to Facebook’s pool of 3 million advertisers, who have the option to extend Facebook ad campaigns to Instagram. Facebook recently said 98 of its top 100 advertising spenders also run campaigns on Instagram. And Instagram’s ad targeting is improved by users’ age, gender and interest data on Facebook. Instagram has worked closely with businesses to try to help them make ads as aesthetically pleasing as user content.
“Images have always been the currency of communication,” Quarles said. “If you think of a community of people who are centered around their passions, food, sport, photography, celebrity, travel, those are all interests that brands and businesses want to connect to.“
Instagram continues to shake up its features. The app is currently rolling out an algorithmic feed and is taking steps to advance search and live-event curation. Instagram also recently rolled out a new simplified, rainbow camera logo. About two years ago, the app launched video, and video-viewing times on the app keep increasing. As of February, the time users spend watching videos on Instagram increased by more than 40% over the preceding six months.
Systrom said the rise of new video tools, virtual reality and e-commerce will continue to shape the app’s direction down the road. And the pace of Instagram’s user growth suggests Systrom and his business won’t be slowing down any time soon. The company’s 350-person headcount is rising, and the team will move to a larger office soon.
“It feels like a new company,” Systrom said. “We have this new look, and we’ve got 500 million under our belt. It’s a whole new chapter.”

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