By Ryan Bradley, senior editor
FORTUNE -- If you're an active Instagram user -- and odds are good that you are, as close to 100 million people check in with the photo sharing application at least once a month -- you have probably already started seeing images and videos pop up in your feed, posted by companies you may or may not already follow. Clothing and accessory maker Michael Kors (KORS) was the first, posting a photo of a gold watch laid on a table with coffee (or is it espresso?), multicolored macarons, and a polaroid of Notre Dame. The photo caption read "Pampered in Paris #MKTimeless." The outcry, based on user comments, was swift: "JUST STOP"; "I hate ads"; "This is super annoying" -- but also, in its first four hours more than 98,000 people "liked" the photo, and one commenter wrote "I have to say, this is very pretty and not obtrusive; I'm on board with Instagram ads atm [at the moment]."
The next ad I became aware of on Instagram was more interesting, because it was hardly an ad at all. The image was of a jet engine -- not an object I am or ever will be in the market for -- built by General Electric (GE). I follow GE on Instagram, and even assigned and edited a short story for our 2012 Fortune 500 issue about just how good the company is at Instagram, how fascinating its feed could be, how its images bring its now 154,000 users in and make them aware of the beautiful machines GE builds.
Beloved social networks like Instagram burrow into their users' lives and trade on sincerity -- the perception of sincerity gives Instagram its value; it's the thing that made it worth $1 billion to Facebook. The insertion of ads into this space is certainly polarizing and potentially disastrous. The surprising thing is that Instagram was already an astonishingly powerful platform for large companies to reach an interested audience. So why taint that relationship by muddying the waters with conspicuous advertisements?
The short answer is that Instagram is part of Facebook (FB), which is a publicly traded company and as such must face shareholder scrutiny if it does not figure out a way to make money. My suggestion is that Instagram (and Facebook) looks to make money by exploiting its compelling service to some of the biggest companies in the world.
Advertising is a business of discrete units: Ads exist in boxes or banners or airtime or, sometimes -- more and more often now -- as articles (a.k.a. "content") with some kind of label that usually reads "Sponsored." Ads are deemed effective based upon still more discrete units: likes, clicks, viewership. All these hard numbers are good for filling up spreadsheets and making selling stuff to people seem scientific when it really is not. Facebook, Instagram, and Twitter are platforms. On these platforms we share all sorts of information with individuals and -- this is crucial -- companies, too.
We "interact with brands" on all these interfaces the same way we do with real people; real people are operating companies' accounts. Sometimes it is awkward, sometimes it is stupid, sometimes the person employed by the company to operate its social media is after nothing more than a lot of likes and retweets, not actual customer service, and it cheapens the entire experience and makes the brand look dumb. This is not entirely a social media editor's fault, though, because those likes and retweets are the discrete units that tell the people in charge how good they are at their jobs, and the people in charge don't really understand how the Internet works. What they understand are the discrete units that fill up the spreadsheets. A "like" is a binary decision that carries a whole range of meaning; sometimes a like or a fav or retweet can be ironic, sometimes it can even express hatred.
The discrete unit model of advertising is flawed and very old-fashioned. A better model is staring us in the face. What if, instead of awkwardly transforming themselves into platforms for advertising, these social media networks sold themselves for what they already are: a service. Many much smaller, more exclusive networks already go this route, charging users a fee. This isn't necessary, or desirable, for companies with user bases as big as Facebook's and Instagram's and Twitter's. Instead, why not charge other companies for help and instruction on how to use the service more effectively, not as advertisers, but as (corporate, deep pocketed) users? Chris Malone, an author and consultant who studies how brands interact with customers, told me recently that "Facebook is totally blowing it ... they have the best relationship management tool in the world. Why not charge companies to interact with their customers in a meaningful way -- solve their problems, chat with them ... " or simply post interesting photographs without dressing them up as advertisements. I suspect that both brands and users will like this model, unironically.
At Apple and HP, ad spending is flat as a percent of sales. The others are spending more.
FORTUNE -- Asymco's Horace Dediu on Monday used last week's release of Apple's (AAPL) fiscal 2013 advertising budget to update the fever chart at left and to add a new chart on the right, one that compares advertising expenses as percent of sales. He notes that although by that measure Coca Cola (KO) outspends MOREPhilip Elmer-DeWitt - Nov 4, 2013 11:58 AM ET
Some publishers have pulled out from mobile news-aggregators like Flipboard because they don't see any real payoff. But the company says it's creating a program to help such smaller publishers earn more.
FORTUNE -- In July of last year, the political news and opinion site Talking Points Memo proudly declared that it was "excited to announce that tablet and smartphone users can now read TPM on Flipboard," a popular, magazine-style news-reading MOREDan Mitchell, contributor - Oct 18, 2013 2:40 PM ET
The Galaxy Gear's viral ad campaign rules. The device itself? Not so much.
FORTUNE -- "Nobody will buy this watch, and nobody should."
That was the New York Times' David Pogue two weeks ago reviewing the Galaxy Gear, Samsung's pre-emptive strike against Apple's (AAPL) iWatch -- and the hero of the attached YouTube video.
No matter. The one-minute ad spot is terrific, worth every won Samsung paid for it.
It appeared on YouTube last week MOREPhilip Elmer-DeWitt - Oct 18, 2013 11:44 AM ET
Advertisers who want to reach people who use social media while watching TV need to know their target audience: It's very different from the TV audience as a whole.
FORTUNE -- Social-media enthusiasts, especially those on Twitter, tend to think their hobby is more popular than it really is. If you're on Twitter a lot, and the people you know best are on Twitter a lot, it's easy to delude yourself MOREDan Mitchell, contributor - Oct 8, 2013 10:25 AM ET
Lots of people insist on watching TV while also interacting on social networks. Facebook and Twitter are both trying to capitalize on it.
FORTUNE -- During the extremely tense opening moments of Sunday's Breaking Bad finale, someone on the East Coast wrote on Facebook (FB), "Breaking Bad ... CAN'T BREATHE."
Which seemed odd. This man was expressing an intense reaction to an intense, riveting scene, even as the scene was unfolding -- and MOREDan Mitchell, contributor - Oct 4, 2013 10:37 AM ET
Facebook is slowly fine-tuning its ads business for the better, and that will likely reflect on Instagram ads coming next year.
FORTUNE -- Like it or not, Instagram ads are coming. But the change may not be as bad as you think.
A report from the Wall Street Journal earlier this week revealed Instagram could introduce advertising within the next year. Since its launch in 2010, the photo-sharing app has seen incredible success. Nearly MOREJP Mangalindan, Writer - Sep 11, 2013 5:00 AM ET
FORTUNE -- One challenge Facebook (FB) has faced, nearly from day one, is privacy. To what extent are Facebook's 1.2 billion status update-pushing, photo upload-loving members protected?
Apple has been aiming for the heart, Nokia for the jugular.
FORTUNE -- If, like me, you haven't been watching much ad-supported TV this summer, you may have missed the dramatic miniseries being played out on what used to be called Madison Avenue -- before so much of the business moved to the Coast.
The latest episodes pit Apple (AAPL), represented by BWA/Media Arts Lab, against Nokia (NOK), represented by WPP's JWT.
Its pitches much MOREPhilip Elmer-DeWitt - Aug 18, 2013 1:29 PM ET
Two weeks ago, according to Ad Age, it was Samsung. This week it's Apple.
FORTUNE -- Okay, I'm confused.
Two weeks ago Ad Age issued a report that showed Samsung topping the list of the 10 fastest-growing ad spenders in the U.S., with total ad spending up 58% year over year.
Apple's (AAPL) growth in ad spending didn't make the top-10 cut.
Apple did make the cut in the chart Ad Age issued Monday MOREPhilip Elmer-DeWitt - Jul 9, 2013 1:20 PM ET
|I work 4 jobs and I'm still struggling|
|Military retirees: You betrayed us, Congress|
|Instagram launches direct messaging|
|Apple supplier draws scrutiny after worker deaths|
|Stocks sink as disappointing December continues|