Get ready for ads, Instagram users

The photo-sharing app hasn't earned a cent, and that's something corporate parent Facebook is determined to change.

By Jonathan Berr Sep 10, 2013 7:49AM
Instagram screen on an Apple ipad (© Mike Blake/Newscom/Reuters)Having acquired Instagram last year for $1 billion, Facebook (FB) wants the photo-sharing app to start earning a profit. That, however, won't be easy. The platform will likely begin selling ads next year in what could be a jarring shift for users who have up to now enjoyed an ad-free experience.

As The Wall Street Journal noted, the wildly popular app has never made a cent. But Instagram's director of business operations, Emily White, told the paper the site will be ready to begin selling ads within the next year.

That's a stark change for Instagram, which "didn't even have the outlines of a business" when Facebook acquired it, The Journal reported. The enterprise employed 32, none of whom were involved with customer service, and only one person was working with the thousands of brands that were starting to use Instagram to promote themselves.

After the acquisition, White's team cataloged the major bands on the site and then met with the companies, according to the paper.

Figuring out how to balance the needs of advertisers with user expectations will be the key. Another challenge will be getting companies to pay for a service they get free today.

"After years without ads, Instagram's big risk is alienating its members -- especially its large base of teen and young adults, who are coveted by marketers," according to The Journal. "Too much overt marketing could clutter the service, undermining one of its strongest selling points."
 
Users are already starting to grumble. Last year, they denounced the site for changing its terms of service in a way that suggested user content could be turned into ads. Instagram later backtracked on its efforts.

Luckily for White, Facebook has a market capitalization topping $107 billion, so it doesn't immediately need Instagram to get into the black. But Wall Street, which has pushed up Facebook's shares 135% over the past year, will demand progress to justify the social network's lofty valuation.

Jonathan Berr does not own shares of the listed stocks. Follow him on Twitter @jdberr.


More on moneyNOW

Tags: FB
5Comments
Sep 10, 2013 8:13AM
avatar
I hope Facebook drives itself into the ground with all the ads, people will get fed up with it and eventually leave for the next big thing.
Sep 11, 2013 1:01PM
avatar
I understand they need to do ads as it is expensive for all that it takes to provide what they provide and they are a business and not a non profit. But as long as the ads do not monopolize the pages, it should be fine. I know everyone wants everything free, but why should companies give everything away free as they would not be in business and those services would not be there. They have to be able to make the money somehow as not to charge you. We pay for cable, satellite or Fios a lot of money every month and pay to watch commercials. That is the rip off!
Sep 11, 2013 3:26PM
avatar
I do not even read the ads, and many times I do delete them
Sep 11, 2013 1:14PM
avatar
Would you even pay $10,000 for a business if you could not get a return on your money? Much less 1 Billion Dollars? Stock holders in any stock company demand a return in all the business the company owns and a return. If the company does not make money they will not be in business and there will be no free services. Grow up people! Those ads give us a lot of free services that make all our lives easier.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

Trending NOW

What’s this?

MARKET UPDATE

[BRIEFING.COM] The S&P 500 has surrendered its opening gain amid weakness in cyclical sectors like consumer discretionary (-0.2%), energy (-0.1%), and industrials (-0.2%).

The University of Michigan Consumer Sentiment report for August was revised up to 82.5 from 79.2 in the final reading, while the Briefing.com consensus expected the reading to be revised up to 80.0. Nasdaq +4.19 at 4561.88... NYSE Adv/Dec 1416/1270... Nasdaq Adv/Dec 1129/1104.

MSN MONEY'S