Instagram Takes Steps to Open Platform to Advertisers

Starting in June, Instagram this year is rolling out to advertisers the ability to more closely direct campaigns by zip code and other data sets like interests in the same ways that brands can target consumers on its parent company Facebook Inc.

In addition it will let advertisers link to external websites or app stores with buttons such as "shop now," "sign up," "learn more," and "install now."

Currently, it works closely with only a handful of brands like Levi's, Banana Republic and Ben & Jerry's. Ads can only be targeted by gender, age and country.

"The quality of the ad experience remains a very important point of differentiation for us," Instagram's global head of business and brand development James Quarles said in an interview.

The move to widen and sharpen the ad platform is a significant one for the popular mobile photo app that has more than 200 million daily active users across the world. It has carefully allowed advertising on its platform starting a year and a half ago. Facebook acquired Instagram for $1 billion in 2012.

Quarles added that making ads more relevant and delivering them to the right target is the next stage of development.

Still, by opening up to all advertisers, including hundreds of thousands of small businesses, Instagram risks losing quality control of campaigns and potentially irking users.

"People are used to seeing beautiful brand imagery in their feeds," said Debra Aho Williamson, principal analyst at eMarketer. "Now they will see some direct response ads and we all know the baggage that comes with that."

Still, Williamson expects a "strong ramp-up" from advertisers long eager to do more with the platform.

Facebook does not break out Instagram revenue but Pivotal Research estimates it is in the hundreds of millions of dollars.

Kfir Gavrieli, co-founder and CEO of Tieks, an online-only retailer known for its ballet flats, said it's currently "clumsy and awkward" for an Instagram user to get from a post to a landing page.

"The shop now button," he said, "will be much more seamless."

© Thomson Reuters 2015