- Meta Platforms (formerly Facebook) purchased Instagram for $1 billion in cash and shares in 2012. By 2018, the company reached a $100 billion valuation.
- Approximately 69% of US marketers use Instagram as the primary tool in their marketing plan and budget.
- Like its parent company, Meta, Instagram earns revenue from selling advertising on its platform.
Mike Krieger and Kevin Systrom founded Instagram in 2010, with headquarters in San Francisco, California. Instagram is a free social network application for sharing images and videos with other platform users.
The company got its start through three funding rounds totaling approximately $500,000 from Andreessen Horowitz and Baseline Ventures before its acquisition by Meta in 2012.
Instagram saw huge growth over the coming years, ending as the second most popular social media network behind its parent company, Facebook.
However, it's losing market share to Tik Tok, a Chinese-based app, with Tik Tok receiving more than a 100-million more downloads than IG per year on average.
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What does Instagram do?
Instagram is a social media network boasting more than 1.1 billion registered users.
While growth slowed in 2020, thanks to the rise of TikTok, the app remains one of the leading social media networks online.
Instagram attracts users of all ages, but its biggest market is people under 18-years.
Approximately 85% of teens use IG, and more than 30% say it's their preferred social media platform.
Instagram is the original platform of the "influencer," with around 130 million users tapping commercial links to purchase products through its user bios.
How does Instagram work?
Instagram is one of the fastest-growing social media networks. While it doesn't have as many users as Facebook, it experiences better growth than FB.
So, it's fast becoming the go-to platform for social media enthusiasts.
Instagram's mobile user base passed the 1 billion mark in June 2018. Still, growth slowed dramatically after achieving this milestone, largely due to the rise of TikTok.
IG focuses on offering a mobile experience, with Facebook's advertising model accounting for nearly 90% of ad revenues.
After its acquisition, Meta decided to add video-sharing services to the platform to bolster its growth and compete against its biggest rival, TikTok.
IG's advertising model continues to evolve, allowing users to create and display slideshows of products and links to sources outside of the platform.
IG offers carousel ads, allowing marketers to facilitate multi-page print campaigns on mobile devices. This model permitted IG to capture a large percentage of the market.
How Instagram makes money
Instagram makes money by offering advertising opportunities to marketers using the platform.
It might surprise you to learn that IG users actually want to see ads in their feeds. According to research, approximately 90% of online shoppers follow companies and brands. Over 50% of users follow a brand or company after seeing its ads in their feeds.
In 2019, over 98% of Facebook's revenue came from its advertising model, with IG accounting for a large portion of this revenue.
No exact figures separate the income earned by FB and IG.
Still, analysts believe advertising growth is bigger on IG than on FB.
According to the Merkle Digital Marketing Report, spending on IG advertising grew 177% in the first half of 2018. That's a huge increase compared to marketers' 40% growth in FB ad spend.
Ad impressions on IG grew by 209% y-o-y, compared to a -17% growth in FB ad impressions in the same period.
As a result, it's clear that the trend in marketing is shifting away from Facebook towards Instagram for the Meta group.
Future growth engine
Instagram continues to grow, but at a slower rate than in previous years.
The rise of the Chinese-based social media network, TikTok, is eating into its market share.
TikTok focuses on video content, attracting more users to its platform than IG.
Meta's recent move into the "metaverse" is the company's attempt to regain its position as the leading social media network.
Instagram faces competition from other online social media networks. It dominates all other apps, except for TikTok.
TikTok experienced much higher growth in 2021 and 2022, and it's starting to gain ground on IG.