Last year, Instagram’s advertising accounted for about a quarter of Facebook’s revenue, coming in at about $20 billion.

This year, the platform will generate even more.

Since the beginning of the pandemic, creators have increasingly turned to the platform to teach a wide variety of classes. Likewise, followers have more free time to watch Instagram Live or IGTV to learn cooking, fitness or art tips from the influencers they admire.

Until now, Instagram influencers have made money outside of the platform by signing contracts with brands or receiving tips from followers using Venmo. 

Last week, Instagram announced they were offering influencers new ways to make money directly within the platform. 

“We have always been committed to supporting creators as they turn their passion into livelihoods,” said the team at Instagram in an announcement. “Given the uncertain circumstances many are facing today, that commitment is more important than ever.”

These changes are framed as great for small businesses and personal brands, but they’re also new opportunities for advertisers.

What are the latest features (and what does it mean for YouTube)?

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Instagram’s hints become a reality

After being hinted at for over a year, Instagram is beginning to directly monetize content via two new main features. 

Badges

Instagram said it has seen a 70% increase in viewership of Live since the health crisis changed our daily realities. People have been at home using social media more, looking for ways to alleviate boredom, exercise or learn new skills.

Users engage with Live videos by responding with likes, comments and donations to the creators. 

The new Badges will allow fans to give money to influencers. In return, they will stand out in the comments, be put on a list of the creator’s badge holders, have access to a special heart and have access to other features.

There are three tiers of Badges valued at: $0.99, $1.99 and another at $4.99.

Currently, all the revenue will go to the influencers, but as the program scales, Instagram will begin to take its cut. 

IGTV Ads

Insta is adding advertisements to IGTV videos. If a viewer clicks through to IGTV after watching video previews in their feed, a brief ad shows up before watching the entire video.

While currently limited to 200 creator partners and big name advertisers, like Sephora, IKEA and Puma, Instagram said that it plans to test user experience throughout the year to make it a good fit for people, creators and advertisers.   

The ad partner program has unlimited room to grow once Insta fine-tunes the experience. MediaRadar found that over 500 brands have placed ads on Snapchat. The appetite for social media is there — and people are willing to see ads to access the content. 

Just like YouTube, Instagram will share 55% of the revenue with its partner creators.

The IGTV rollout comes after the recent release of Facebook and Instagram Shops.  

Instagram Shops allows small retailers to shop on the platform without switching to Amazon or another website. This will make advertising on Instagram even more valuable for consumer brands.

Instagram and YouTube ramp up the competition

As the platform transitions its revenue model, it will become a direct competitor to YouTube.

They both allow anybody to upload videos and now offer the same cut of revenue for self-made stars. However, Instagram has the advantage of learning from YouTube’s weaknesses. 

For starters, Insta has created a strict monetization policy for partners. Instagram is coming off aggressive in this arena because YouTube, on the other hand, has had a difficult time assuring brand safety.

Each video with an will be human-viewed first before being given the green light to ensure that content is safe for brands.

They aren’t just putting brands at the center. Creators appreciate Instagram’s approach with them — it treats them as collaborators, rather than treating them as expendable resources. 

One creator, actress Amanda Cerny, who has 24.8 million followers, is transitioning away from YouTube to Instagram.

“I never know who I’m going to reach [on YouTube], when I’m going to have ads, when I’m not going to have ads,” she explained to The Verge. “It’s not very transparent, and I don’t really understand it fully. Even as one of their bigger creators on the platform, I’m still trying to understand the platform.”

Instagram has its own talent-scouting and development team, much like Hollywood, rather than relying on algorithms to find the next star. Instagram wants to treat creators as valued members of a community and make sure they are set-up for success, rather than letting them guess how the algorithm is changing. 

YouTube has its own plans to increase revenue for creators. Its Super Chat feature is improving, but more importantly it’s launching new ways for creators to sell merchandise, membership subscriptions and Super Stickers. 

As the advertisements roll out, we’ll see how the two platforms create better experiences for all participants: consumers, creators and advertisers. 

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