Daily Management Review

Instagram To Play New Role In Increasing Facebook’s Revenue


Facebook treads carefully when comes to dealing with Instagram generated revenue; although the company has plans on exploring new horizon with the help of this app.

Facebook has plans up his its sleeves to boost its profit margin. Although, it didn’t have dramatic effects of Yelp and Twitter, the company has held brief discussion regarding “new ways” to “make money from Instagram”.
Sometimes last month, the company of Facebook issued its “second-quarter results” which still hold a strong ground so much so that it has beaten the expectations of Wall Street even after the net income was announced after deducting the “heavy spending” which includes a sum of “$1.2 billion” that were dedicated for research and development purpose. Previous year, the company had plans of earmarking an amount of “$2.7 billion to $3 billion” for their capital expenditure for this financial year. In fact, the executives did speak about reducing their spending pattern “during the rest of 2015”, albeit in a light tone. They also revised the guidance “to $2.5 billion to $3 billion”.
However, columnist Therese Poletti informs that there is one “arena” wherein Facebook still generously pours in money which refers to their “product development”. Consequently, the “Instagram photo-sharing app” has become the recent focus of attention. In month of April 2012, Facebook bought up the Instagram startup for “$1 billion”. Presently, the company still holds an undisclosed revenue amount generated by Instagram. About a year ago alone Facebook sold “ads on the service” as though cautious of every step they take lest it disrupts the “Instagram flow”.
Investors were informed by the chief operating officer of Facebook, Sheryl Sandberg that the company is in the process of experimenting with “ad formats available within Instagram” whereby looking forward to expand their field. In Sandberg’s words:
“Over the coming months, Instagram ads will be available to more advertisers with new formats, better targeting and the ability to buy [advertising on Instagram] online as well as through third-party [media] planners”.
She also added that Instagram is “moving toward” bringing purchases and consumers together, binding both with a link, though it will not be “contemplating a buy button”. As per a report generated by AdWeek about two months ago that a new feature of Instagram, whereby marketers can “more easily present checkout page links” to the app users. This feature was firstly launched by “the Gap’s GPS, +1.19%  Banana Republic chain”. The COO stated that:
“We’re going to be really thoughtful and strategic about how we ramp revenue. Instagram remains small relative to Facebook, and it’s going to really take time to have significant impact on our growth.”
In spite of the eager investors who wish to know the revenue breakup generated from the asset called Instagram as Facebook’s continues to increase its expenditures, the latter remains careful about disclosing any information because:
“...Facebook is aware that Instagram’s core users are accustomed to a clean, elegant interface. And the loyalty of that large installed base is not something Facebook wants to put at risk”.