DiDigital

How Instagram can gain users, make money and keep its users happy

Instagram; You can start making serious money today without upsetting your users and at the same time massively increase your user base. Here’s how:

Instagram is an iOS only, superb photo sharing app. It’s easy, quick and fun to snap a picture and share it. The filters and the forced square photo format makes photos more interesting and appealing than they really deserve to. I love it. On top of this, it’s free, there are no ads and no extra premium features are available as in app purchases. It’s great and it’s free. But this can’t go on forever of course. Look at Spotify and even more recently, Instapaper that went premium only. Companies need to make money in order to exist. Instagram just raised $7 million in funding and the investors will of course eventually want to see some return.

But it’s problematic for Instagram. How should they do it? The app has a huge number of users and Instagram needs to use them in order to make money. The company has started to include sponsored hash tags as an unobtrusive way to make some ad money, but that is hardly enough. Maybe they could add some extra features and make them available as in-app purchases only? Yes, they could, but it wouldn’t bring in a lot of cash either. It’s been tested by another popular photo app, Camera+, and the outcome has been very modest with just 5% pulling the trigger. But 5% is better than 0% and Instagram could actually introduce this without upsetting its users too much. Another slick way could be to introduce nice looking ads in peoples photo streams in the same square format and style as the typical Instagram photo. Lets say every 15th photo is a clickable display ad. Or that users are served one ad everytime they use the app. That wouldn’t be to bad right? Also, give users the chance to opt out with a premium offer, for example by making it possible to buy ad-free months. This needs some further thinking. In-feed advertising has previously been a big no no within social networks, but I belive that Instagram has a shot at pulling it off. I’d much rather have a nice looking photo/ad in my instagram feed than a sponsored tweet in my twitter feed. I don’t know why, but I don’t think I’m alone. It would be more effective as well.

So two proposals so far:

Extra premium filter (just one or two, don’t clutter the app)

Big fat location targeted display ads. They would still be semi-unobtrusive because of how they look, where they are placed and how they appear.

And now, the evil twist: Don’t upset your users unless you really have to (lex dickbar). So how can Instagram try out all these monetizing ideas and find the right balance between making profits and keeping the users happy? Release an Android version; Android users are dying for some Instagram-love and will put up with the abuse… A little cynical maybe, but I think I’m right. If I where on Android, I would rather have an adfunded Instagram app than no Instagram at all. Maybe Instagram shouldn’t put it exactly like that in the press release for the Android version though.

Instagram is, when thinking of it, a poster boy for what an adfunded app needs to be in order to make serious money:

Massmarket with millions of users.

Engaged users with high activity levels

Potential to use larger display ads than what’s normally possible within mobile

Even though they are large, the display ads would be less obtrusive on the user experience than normal banners in for example text messeging apps or games.

Location awareness. Build a location based ad serving platform.

Instagram could use Android to start trying out monetization strategies, start making money, gain a hell of a lot of new users and keep their current user base happy. When the experimental phase is over in Android land, bring it over to iOS. The iOS users would then have learned about these ads through media and Android-friends and maybe growned accustomed to the idea. Pjuh. I need some coffe. Bye for now.