SAN FRANCISCO — In a major bid to ramp up advertising revenue, Instagram is rolling out new features for small and medium sized businesses including the ability to buy an ad within the mobile app.
"This is really the first time you can advertise like this within the app," James Quarles, Instagram’s global head of business and brand development, told USA TODAY.
"We have millions of businesses, great community members, and today we want to help them to have the capability to be a business on Instagram, not just be an account,"
The features which will roll out in the U.S. in coming months include business profiles that help customers get in touch and analytics to help businesses better understand the behavior and demographics of followers.
"Instagram’s ad business is on a rapid trajectory," said eMarketer analyst Debra Aho Williams.
The research firm expects Instagram's global revenue to reach $1.53 billion this year, up 144%.
"After focusing mainly on larger businesses, Instagram is now targeting ad revenue from smaller firms," Williams said.
The challenge for Instagram: maintaining the user experience while opening up advertising to smaller businesses.
"Users may see more ads in their feed, and some of those ads may not have the high quality and visual appeal of larger advertisers’ ads. Maintaining a high bar of relevancy and quality will be key for Instagram, otherwise its users will get irritated," Williams said.
With the new ads, businesses will be able to turn posts into ads and add a button to encourage people to take action. Businesses can select a target audience or have Instagram suggest targeting.
Facebook is positioning Instagram as a place brands and small businesses can increase awareness and spur sales.
Instagram opened up advertising to businesses of all sizes in September. In February, Instagram said it has more than 200,000 advertisers, showing early commercial promise for the Facebook-owned photo-sharing service.
Much of that growth has come overseas. Three-quarters of Instagram's advertisers are outside of the United States, Facebook said.
Investors are betting Instagram's nascent but growing advertising business will pad Facebook revenues.
Rosenblatt Securities analyst Martin Pyykkonen estimates that Instagram will account for about $1 billion in advertising revenue in 2016, about 5% of Facebook's total revenue. SunTrust Robinson Humphrey analyst Robert Peck estimates Instagram could "conservatively" lift revenue as much as $2 billion by 2017.
Instagram hit 400 million users in September. In March, Facebook announced it has 3 million advertisers.
