Instagram Business Model: The Best in the Market

Instagram started out as a free social media platform back in 2010. Kevin Systrom and Mike Krieger worked together to put out a social media app that focused on sharing images and videos among your network. Hence, Instagram business model and the app was created. Instagram took off because of its unique operating model and millions of users flocked to the image sharing app.

As of now, Instagram is owned by Facebook and is one of the largest social media platform that has a strong celebrity and brand presence. Moreover, unlike other acquisitions of Facebook, Instagram is developed and grown independent of other apps. The developers of Instagram only work on its own app.

instagram business model

The idea of Instagram was a simple and easy to capture pictures and share it with your friends and family. Over the course of years, it has stayed true to its initial idea. Furthermore, they have introduced new features to bring more value to the users of the app.

Instagram’s revenue model is similar to Facebook. The advertisement model from Facebook is also applied on Instagram. This is the reason why you may see similar ads on both apps. If your Instagram account is linked with Facebook, you can also receive suggestions for new accounts in addition to targeted ads.

The Instagram Business Model

Access to good cameras on smartphones has increased the amount of pictures that are taken every day and shared on social media. The user friendly interface of Instagram has made it a popular choice for users who like to tell stories through their pictures and videos. Moreover, the ability to edit pictures in the app is convenient too.

The idea of Instagram is to make sharing pictures easy so that more people are willing to do it. This ease of use attracts more users. In return, Instagram makes more money when the number of users increase. We will talk more about the revenue generation later.

instagram business model

Furthermore, the rate of image sharing has increased exponentially. Different brands and marketing strategists understand the importance of this paradigm shift. Hence, social media platforms like Instagram has rose in popularity. Due to a host of features and great UI experience, Instagram enjoys the spot of being the best image sharing social network.

Over the course of years, the business model of Instagram has stayed the same. However, they have changed algorithms that are responsible for the monetization of the app and users’ activity. Like other social media platforms such as Snapchat, WhatsApp and Facebook etc., you need to first sign up for an account. Making an account on Instagram is easy and free.


The Instagram account allows you to upload pictures and videos, upload ‘Stories’ – pictures and videos that disappear after 24 hours, edit and add filters to your content, follow other accounts, and have a live session with your followers.

How does the Instagram Business Model make money?

instagram business model

In its early stages, Instagram was not making money. In late 2013, they introduced advertisements to their business model to monetize the activities of users. This revenue model was further revamped to show targeted ads to their users.

The company used your search history and different activities on thee app to show ads that would interest you. Aspects such as the accounts you follow, the accounts that your followers’ follow, and the posts that you like in the Explore section etc. help the algorithm to decide the best ad to show to the user.

Targeted ads are more likely to turn prospective customers into real customers. The return on investment is greater and targeted ads bring in more money for Instagram. Most of the new features had advertisements built into them.

These targeted ads were shown to users through sponsored posts in between their usual feed. They were first introduced in November 2013 to users in US. It was later introduced to UK users in September 2014 before it was finally baked into the stable build of the app.

Feature updates

instagram business model

Instagram introduced advertisements on October 3, 2013. Then 2 months later, Instagram added Direct, a feature that allowed its users to send pictures to only selected users. You could choose the people who would receive that picture.

A major feature was added on August 2, 2016, when Instagram introduced Stories, a feature that was blatantly copied off Snapchat. Just like Snapchat, you could post pictures and videos that disappeared after 24 hours.

Furthermore, on November 21, 2016, Instagram added a live feature that allowed the users to communicate with their followers on a live video chat for up to an hour.

Next year, Instagram allowed a carousel to its post that made it possible to add up to 10 photos or videos in one post. This made it easier for businesses to put more pictures of their products.

In 2018 and 2019, Instagram launched two business oriented features. Businesses could now tag their products in their posts. This made it easier for users to find details about products they liked.  Moreover, the checkout feature allowed the users to buy products directly on Instagram. Hence, the users were now no longer redirected to third party websites to complete sales.

Instagram Business Model Makes Most Money from Sponsored Posts

Yes, you read that right. Just like Facebook, a huge chunk of the entire revenue of Instagram is generated from sponsored posts. These posts are hidden around the feed with a call to action button right next to them.

Advertisements on a carousel

Moreover, the carousel lets the brands use pictures to tell exciting stories about products. Brands have been successfully using this feature to promote their products.


Also, there are advertisements in between the stories of different users. These are targeted ads that make money for the social media outlet.

Ads from Facebook on Instagram

Furthermore, brands can share the same ads on Facebook and Instagram. This is possible even if the advertising company does not have an account on Instagram.


Instagram enjoys the distinction of being the most popular image sharing social media platform. Furthermore, the number of users have been growing every year, thanks to the introduction of interesting features.

Instagram makes its money through targeted ads that show up as sponsored posts and in between stories.

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