According to its site, Instagram is a “fast, beautiful and fun way to share your life with friends and family.” And that’s great! But Instagram just announced that they will be introducing ads into the user’s experience, is the best model Instagram could use to generate revenue?

Introducing AdStagram

Placing ads around content is a tried and true way to generate revenue while offering a free service. Google does it, Facebook does it, mobile apps do it, and even little blogs with a unique viewership of 20 people try to do it. So, why shouldn’t Instagram do it, too?

Instagram can attract plenty of brands to spend advertising dollars. There’s little doubt about that. But, if they take that route, they will run the risk of subjecting their users to potentially unwanted ads for the sake of revenues.

With that said the medium of expression that Instagram provides lends itself well for brands to increase awareness and engagement.  Let’s take a look at H&M, they have over 1M followers, however a large number of those followers also follow hundreds of other accounts.  Therefore, there is a fair chance that a brand’s followers may miss a fair portion of their posts.  

Employing a Twitter like suggested follower or suggested list ad unit would allow brands a mechanism to pay to acquire potential customers.  They could also take a page from Facebook’s playbook and allow brands to pay for “suggested” posts, where a brand could pay to insert a photo into your feed.  The latter strategy could be seen as much more disruptive to the user’s experience.  To prepare their users for such ad units, Instagram could begin to insert photos that your friends like into your feed to make the “suggested” post feature seem less intrusive.

It’s an easy route to go, as long as Instagram is generating the traffic to make it worth their while.  That’s not the problem, since they have well over 150 million users.

The problem is that ads could potentially degrade the experience of Instagram users.  Keep in mind that these visitors are used to an ad-free Instagram experience.  Now consider that Instagram provides users with the opportunity to display works of art to a global audience.  Ads could also distract users from the aesthetic experience they crave seek from Instagram. 

Introducing InstaCommerce

There are other ways to generate revenue online, even while offering a free service.  eBay comes to mind here.  eBay is free to shop, but requires payment from sellers.  Like the advertising model, a commerce model could potentially degrade the Instagram user experience, if a user’s feed begins to be flooded with photos of folks just looking to sell a myriad of items.

This model does require a bit more creativity to make it work.  Luckily for Instagram, they have an advantage.  Real sellers are already using Instagram to showcase their work!  Up and coming fashion designers are using Instagram to reveal their work to the world.

Want to see for yourself?  Check out these fashion fellows worth following:

In order to generate revenue, Instagram would need to find the right balance between commerce and the artistry and communication that is the heart of their site.  Giving users who wish to sell items an option to add a “Purchase” button right next to the “Comment” button seems like a natural move.

Innovating Success

Instagram has already announced that ads are coming.  It sounds like Instagram will roll this out slowly and will give users the options to block ads that they do not wish to see.  It’s possible, but I’m not convinced a soft approach would generate enough revenue to protect the user’s experience.

So, maybe it’s time to take a step back.  Bridging art and commerce is a business tradition even older than hosting ads.  It’s a way for people to appreciate beautiful things, whether they can own it or not.

It’s also a way for those who can afford those beautiful things to keep the Instagram experience ad-free for the rest of us.  With a little innovation, Instagram could embrace the commerce while keeping the artistry intact.  All it takes is a little creativity and that’s what art and business have most in common.

I’m looking forward to see the monetization progression of Instagram, it has great potential to be a real revenue driver for Facebook.  What are your thoughts?