As it nears its third birthday, Instagram is showing no signs of slowing down. In fact, based on new user numbers released by the company, the photo service is growing faster than it ever has, having now reached 150 million monthly users, 50 million of which joined in the last six months or so.
That's great news for Instagram, but what likely excites parent company Facebook even more is the assertion that Instagram will begin ad operations within the next year.
According to Instagram's blog post announcing the growth, more than 60 percent of its users are outside of the United States. That's indicative of the new face of the smartphone market, which has seen massive growth in emerging markets. As a Raymond James report explained earlier this year, "smartphone growth in emerging markets was up 64% y/y, substantially higher than the overall global y/y growth rate of 47%. Smartphone market growth in China remained strong, up 101% y/y after growing 110% in 1Q13."
Additionally, the US is no longer in the top 10 worldwide for smartphone penetration. While that stat is only tangentially relevant to total user bases as the US has a much larger population than the other countries on the list, it's still indicative of the smartphone market's global reach. That Instagram has so many non-US users is a positive sign for the company.
If Instagram is truly to be worth the four Washington Posts that Facebook paid for it, it's going to have to figure out how to make some revenue. It's been speculated that Instagram would bring sponsored posts in the vein of Facebook, and now the company has officially said it expects to bring ads within the next year.
That's according to Instagram director of business operations Emily White, who spoke with the Wall Street Journal about Instagram's transition from social network into serious business. The issue is one that all social networks face: it's hard to start delivering valuable ads to users without jeopardizing the user experience that made the network successful in the first place.
Facebook's largesse and diversity of user experiences—newsfeeds, walls, etc.—has given the company a little more leeway in experimenting with ads without getting too into users' faces. But with Instagram, where the single feed is essential, shoving in a Pepsi ad is a trickier dance.
As tends to be the case with social startups with huge user bases, making money right now is not a concern. "We want to make money in the long term, but we don't have any short-term pressure," White told the WSJ. No matter how long it takes for Instagram to roll out ads, the essential problem remains the same: How can the company convince users that ads aren't intrusive when they're conditioned to an ad-free experience?
Good messaging from the company is key—people generally understand that ads are the tradeoff for lack of paywalls—as well as delivering quality ads that don't take away from the experience. That latter part doesn't seem difficult; just look at fashion magazines, where ads with high quality photography are just as much a part of the experience as the editorial. It's not yet clear if Instagram will go that route, but at this point, it seems like the most natural fit.