Strategy

How Does Instagram Work and Make Money?

by Tabassum Nusrat Soti

Instagram Company Overview

There are very few people in the world who have not heard about Instagram. If you want to share your story through pictures and connect with the world, then Instagram is the perfect place for you. And what do you need to give them in return? The answer is nothing. It is indeed a free app developed by Kevin Systrom, Mike Krieger, currently owned by Facebook, Inc.

Instagtam - How does it work and make money
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Instagram is the largest media-sharing social networking app after Facebook. It has about 1 billion+ users according to google play store data. So how are they doing it? How are they giving out free service to more than 1 billion people? Before answering that, we need to know where Instagram comes from. Well, as mentioned earlier, the Systrom-Krieger duo co-founded Instagram in early October 2010. They created an application that allows the user to upload photos and videos with captions and advance filters. Primarily it was available on iOS devices only, but in 2012, the user count took a hike as they launched an Android version of the app. The developers recorded up to a million installations in less than 24h.

Also, it was the same year (2012) Facebook bought off Instagram from the co-founders for $1 Billion. The app now has a net worth of more than $100 Billion by the end of 2019. A company worth that much can provide all sorts of free services to the users. But the big question remains, how are they making that amount of money?

The study will discuss the products and services, target market, competitors, and how these things work as a whole system. It will also elaborate on how Instagram makes money from its business.

How Does Instagram work?

Instagram works like any other social media app. You can click pictures with filters and post them directly and put on your story. You can live stream and chat. You can get connected with anyone on Instagram and share posts.

Instagram is much more than sharing. You can also create business and branding profiles. You can link-up other web addresses with your profile or paid visual advertisements. Becoming an Instagram influencer is another purpose of using Instagram. You can create your original content and share it with the world. This is how Instagram works. You think it and you share it through its services.

And Instagram monitors every activity every ad posted on the app. So, it maintains the standard of the app and restricts abusive, irrelevant and antisocial acts. It keeps your privacy and lets you socialist on your terms.

Competitors of Instagram

Well, the social media market is no monopoly market. Every app has its fair number of competitors, so does Instagram. Even though Instagram is the leading app in its background, it has to deal with many other media sharing apps. Facebook is often considered as a competition for Instagram. But according to Yahoo finances, Instagram is not contradictory to Facebook’s revenue or vogue. Needless to mention, Facebook owns Instagram. So, the debate remains relatively one-sided.

As for now, the major competitors Instagram has are-

  • Snapchat
  • Twitter
  • Tiktok
  • Pinterest
  • WhatsApp.

Services and Products of Instagram

Instagram is much more than just sharing pictures. It provides a large number of excellent services which dragged it to the top of all similar apps. It offers you-

To share media (photos and videos) with a high-quality end.

  • Advanced and fun filters.
  • Live streaming facility.
  • Direct messaging option.
  • 24h story thread facility.
  • Wide visual marketing platform
  • to create a business profile opportunity.
  • To connect with friends and family as well as the world.
  • IG TV – long videos posting etc.

With every upgrade, the app introduces new features for the users. Instagram is always trying to develop more attractive, mind catching and creative elements to add, for entertaining and occupying attention. Its recent upgrade added IG TV advertisement, which allows extensive, more detailed advertising and creative filters makes the app more fun.

Target Market Analysis of Instagram:

For being accessible for all, the target market determination can be a bit tricky for Instagram. But they have their own ways to get the work done. Without a doubt, their primary target is THE YOUTH GENERATION (Average age 20-35). But the analysis says people of all ages spontaneously use Instagram. But 72% of the age range 18-24 use Instagram. So, they try to keep it the “youth-friendly” most of the time.

By analyzing Instagram’s working criteria, it can be said that Instagram is focused on fast-paced cities and countries, where the population is accelerating and people live a fast track, spotlight life (USA, India, Brazil, Japan, UK etc.). They focus on large cities where social life is expandable and the urge for fame is widespread.

Also, they focus on the area where people can afford smart devices. So, affordability and price devices are also taken in count while determining the target market. Like, smart devices are vastly available in the USA, India, Japan, Singapore etc. However, the earning of people has less impact on selecting a target market due to mass production and distribution of in-budget smart devices.

For more information about the target market, you can visit sproutsocial.com

How does Instagram Make Money?

Now, how did Instagram grow its net worth to $100 billion? How is it paying millions to the influencers? The answer is simpler than you think.

Earlier, we talked about branding advertisements and business profiles. These are the ways how Instagram makes money. The prominent part of Instagram revenue comes from advertising. They advertise businesses and get paid for every advertisement seen by the non-paying users. Because every day, their product is getting viewed by millions of people. And they pay for the number of people they could reach out through the ads.

Instagram uses the multi-sided platform business model. They let people operate the app for free but on the other hand, they created a platform for the people who want to earn fame and money. So, Companies, brands, apps, websites and professionals pay Instagram to advertise their name visually. Instagram encourages influencers and business profiles to portrait advertisements. They get paid accordingly. Some pay $10 per 1000 views or likes or followers, and some pay $100 for only 10 views. It depends on the type and size of the businesses; it is indefinite. The paid advertisements are the core source of Instagram revenue.

Bottom Line

The bottom line is Instagram can provide free service to most of its users because it gets paid for the visual ads it portrays in the app. It is a simple and effective method of growing revenue. This is how Instagram makes money from its online platform. The success of Instagram lies in the very execution process. They know how to attract people and investors. They provide ample features and entertainment opportunities to create a long-term relationship with the users. Instagram started with being an app people could socialize with and have some fun. But it has become one of the largest platforms of creativity, business expansion and intensifying fame.

Related: Revenue Model of Linkedin – How does Linkedin Make Money

Reference

  • https://en.m.wikipedia.org/wiki/Instagram
  • Play store https://play.google.com/
  • Facebook Buys Instagram for $1 Billion – The New York Times
    https://dealbook.nytimes.com/2012/04/09/facebook-buys-instagram-for-1-billion/
  • Instagram net worth, https://www.bloomberg.com/news/articles/2018-06-25/value-of-facebook-s-instagram-estimated-to-top-100-billion
  • Target market, https://sproutsocial.com/insights/new-social-media-demographics/
  • Instagram revenue data, https://www.statista.com/statistics/271633/annual-revenue-of-instagram/