Instagram's $100 million deal with Omnicon

Omnicom can spend up to $100 million over the next year putting its brands on the photo sharing site

Financial trends and news by Steven Loeb
March 8, 2014
Short URL: http://vator.tv/n/3588

When Instagram launched its first ad back in November, the ad was extremely successful, probably more so than anyone imagined it would be. That success no doubt peaked the interest of many brands and agencies, so now the photo-sharing site is getting ready to monetize, and in a big, big way.

The company has gone ahead and signed its first deal with an ad agency, a year long commitment from Omnicom to spend up to $100 million, according to a report out from AdAge on Friday.

What that means for Instagram users is that they will begin to see advertisements in their streams from brands that work with Omnicom's media and creative agencies. Omnicom's media agency network includes PHD Worldwide and OMD Worldwide.

In the short term, Instagram will only be working with a "very limited number of long-term partners," the report said.

In addition to the financial part of the deal, it seems as though Omnicom will also help Instagram become more targeted in selecting who to send ads to, as well as measurement, as in how long to run each ad to each user.

Instagram put up its first ad from fashion designer Michael Kors. It is a picture of a gold watch, on a table, with some macarons next to it. The picture began appearing in the feed of users who did not follow the Michael Kors account.

People complained but the results spoke for themselves: the picture received a total of 217,700 Likes within the first 18 hours of it being posted, which was an increase of 370% compared to the average that Kors usually saw.

In addition, the ad also brought Kors 33,000 new followers, meaning that his number of followers jumped 16 times from the 2,138 he was gaining on average.

And finally, there is the actually audience of the advertisement: Kors' average Engagement Rate is 3.57%, so that would mean that the ad had an audience of 6.15 million Instagrammers.

With numbers like that it is no surprise that other brands are so interesting in getting their message onto the site.

For Instagram, this is just the top of the iceberg, as there is huge opportunity for the company to make buckets of money off of advertising in coming years.

Worldwide mobile ad spending increased by 105.9% in 2013, to $18.16 billion, according to an eMarketer report. By 2017, it is projected that advertisers  will spend $72.32 billion on mobile worldwide, nearly 10 times what was being spent in 2012.

One of the biggest beneficiaries of the increase has been Facebook, the company that owns Instagram, which recently bumped Yahoo and Microsoft to become the second largest digital ad seller in the United States. 

Facebook has seen its share of global mobile revenues increase, growing from 5.34% in 2012 to 16.91% in 2013, putting it way ahead of any other competitor besides Google.

Neither Instagram nor Omnicom were available to confirm the report. We will update this story if we learn more.

(Image source: technobuffalo.com)

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