19 Jun

Facebook Ready to Monetize Instagram—Are Users Ready?

WRITTEN BY Matilda James

Instagram opens the door to more advertisers

Facebook (FB) has realized the potential of advertising on Instagram and has some serious plans to capitalize on the popularity of its mobile photo-sharing network.

According to a recent report from TechInsider, advertisements on Instagram will become more targeted, taking a user’s interests, age, and gender into account. Facebook will make Instagram available to all kinds of advertisers and introduce new ad formats.

Facebook Ready to Monetize Instagram—Are Users Ready?

With these new formats, viewers will be prompted to click on a link to buy a product or install an application that’s being advertised. The idea is to generate revenue from its massive audience base.

Instagram is a great place to advertise

Instagram has reached the 300 million-user mark, and the majority of its users are young and high-income teens. This is exactly the type of audience big brands are after, so it’s a complete win-win situation for both marketers and advertisers.

According to a survey of 7,500 US teenagers conducted by Piper Jaffray last year, Instagram, Twitter (TWTR), and Facebook were the three most popular social networks among teenagers. Yahoo!’s (YHOO) Tumblr, Google’s (GOOG) Google+, and Pinterest were less popular social networks. As the chart above shows, 30% of US teens use Instagram.

Initially, Facebook had posted restrictions on the content being marketed on Instagram, and this made Instagram unique on social media. Will users accept ad-crowded Instagram feeds or reject Facebook’s aggressive move into digital advertising?

The verdict will be out in the coming months, yet one thing is for sure—Facebook is investing heavily to improve Instagram, and it believes that Instagram is on the right path.

For portfolio exposure to Facebook, you can consider investing in the Technology Select Sector SPDR Fund (XLK), which has 4% exposure to FB.

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