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InstagramMany companies have discovered the social network Instagram for their online activities. Instagram gives them the opportunity to reach a new audience and to present themselves in a creative way. But what has been an easy undertaking so far will take a much greater effort in the future - especially smaller businesses will get problems. The main reason is Instagram's changed way to generate its news feed which in turn mainly has economic reasons.

Instagram has become an ideal online marketing channel for many companies. This is mainly for two reasons: First, the social network currently is hip and hot. Secondly, the user engangement on Instagram is outperforming most of its competitors.

 

Change of news feed

In the past week there was the announcement of Instagram changing its news feed algorithm. Instead of displaying news in a chronological order, the items are now selected based on an algorithm that emphasizes "the moments you will care about most". According to Instagram, users missed about 70 percent of the news feed items. This gave reason to change the timeline which is bad news especially for smaller companies, meaning that commercial content will probably prevail in the future of Instagram.

 

Monetary reasons

The most probable explanation for Instagram's recent change is an economic one. By feed selection Instagram is able to shape the displayed content under the directive of commercial aspects and to make better offers to the advertising companies. Those who possess the appropriate budgets will have the edge over others with smaller budgets.

Instagram's announcement has to be seen against the background of Facebook's economic growth, the company Instagram belongs to. With 5.8 billion USD in revenue in Q4 2015 the expections were exceeded by far. For Instagram a growth by 149 percent in this year is expected resulting in anticipated revenues of 1.5 billion USD. In order to reach this, user growth won't be enough. If Instagram wanted to extend its revenue by generating more users exclusively, their number had to grow by 600 million in this year. That means: There must also be a per-user growth of revenues. This can be achieved by placing targeted ads in the news feeds.

Besides, an approach like that would correlate with a pattern known from Facebook's own news feed.

 


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