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Are Instagram Ads Destined to Scale and Fail?

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There has certainly been a burst of negative feedback since Instagram rolled out promoted content into their users' news feeds last week. But the fact of the matter is that an initial backlash against the launch of advertisements on a network that was previously free of them is to be expected. The roll out of ads is unlikely to cause Instagram's user base of 150 million to abandon the network anytime soon.

However, Instagram's journey as an advertising platform has just begun, and the path to profitability is rife with potential aesthetic pitfalls that could see them dethroned as the "hip" social network among other rising social media platforms. Instagram will have to tread very carefully as they continue to scale their advertising model, which they surely will under pressure of a publicly-traded Facebook overlord.

How Instagram chooses to evolve their advertising platform will ultimately determine their fate. Will Instagram retain its cool, uncluttered image with native advertising from big brands? Or will they begin to offer advertising solutions for smaller brands -- expanding monetization while also putting their own "coolness" at risk?

Instagram is fully aware of what is at stake. The company has taken an extremely careful approach to the initial roll out of advertising by notifying users ahead of time, explaining their ad format in detail, welcoming feedback on specific ads and giving users the option to hide ads which bother them. Additionally, in an attempt to ensure quality and relevancy, Instagram has limited their first advertisers to large, nationally-recognized brands that will be easy for users to identify.

The early participation by Michael Kors, Lexus and others reflects an embrace of native advertising -- with promoted posts blending (relatively) seamlessly into users' news feeds. This approach enables approved advertising partners to launch high-impression branding campaigns that are likely to resonate with some of Instagram's 150 million active users.

However, even if smaller brands were eligible to advertise on Instagram, the current ad format would serve them poorly. To avoid irritating their user base, Instagram's initial ad format does not allow advertisers to include destination URLs for users to click and complete an advertiser's desired action -- making a purchase or signing up for a newsletter. The ads don't even allow advertisers to prompt users to "follow" them via their promoted posts -- another significant KPI for most brands advertising via social media. Without KPIs that can be directly attributed to Instagram advertising, the current ad format would not prove to be a measurable or viable advertising medium for anyone other than enterprise-level businesses.

But what will Instagram look like if click-through and follow functionality becomes available to the average digital advertiser? Even with a gradual expansion, opening the platform this way will cause a jarring user experience crowded by loud banner ads and pushy calls to action highlighting free shipping and discounts. This evolution would likely be a massive turn off to users, could irreversibly damage Instagram's brand and may hurt their chances of remaining competitive a few years from now.

And it's inevitable. Though Instagram has defined their mission statement as "capturing and sharing the world's moments through photo and video features," their real mission under Facebook is to make money. In order to become profitable and reassure investors, Instagram will have to continue to expand and monetize their platform with options that are appealing to a greater volume of advertisers. However, in order to pull this off successfully, Instagram had better tread lightly and take innovative steps to maintain a native advertising format while still expanding to serve mid-sized businesses.

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