Instagram Monetizations

Part
01
of three
Part
01

Instagram Monetization - Brand Partnering

Two case studies were identified, one representing a high conversion rate and the other a low conversion rate. Both influencers were found to use a diverse range of sources for earning revenue. Arielle Charnas and Kayla Itsines are estimated to bring in earnings of $17.06 and $17.42 per follower respectively.

ARIELLE CHARNAS: HIGH CONVERSION RATE CASE STUDY

  • Charnas has 1.1 million followers on Instagram. She is included as an example of an influencer with a higher conversion rate. She has an estimated 2.8% engagement rate, which is fairly high. The calculation is provided in the strategy section.

HOW THEY USE THIS METHOD OF MONETIZATION
  • Charnas started her Instagram career early (in 2010) before the platform was saturated with influencers.
  • According to Michelle Merino, a consultant specializing in influencers: Nordstrom forged a deal with Charnas and indicated that this type of deal is far more complex and comes with strings attached "exclusivity terms, equity or rev share compensation models," which suggests that money is generated by going beyond just pay per engagement or post.
  • Charnas leverages the visibility of Instagram, allowing physical products to be associated with her daily life.

HOW MUCH THEY EARN PER FOLLOWER OR ENGAGEMENT
  • Charnas earns an estimated $17.06 per follower. The calculation is provided in the strategy section.
  • As a point of interest, her earnings come from complex arrangements that may involved elements such as equity and revenue shares.
  • As a useful indicator of her level of success, Charnas earned more than $4 million in sales one day.

KAYLA ITSINES: LOW CONVERSION RATE CASE STUDY

Kayla Itsines has an estimated 0.3% engagement rate, which would be regarded as low. The calculation is provided in the strategy section. Itsines has 11.7 million followers currently.

HOW THEY USE THIS METHOD OF MONETIZATION
  • Itsines developed a successful reputation as a gym instructor, and subsequently relied on word of mouth to grow her base.
  • She then started an Instagram and Facebook marketing campaign in 2012, which provided training and nutrition advice.
  • Itsines generates revenue from sources beyond mere 'pay per post' or 'engagement'. These include "...paid ebooks, a stadium tour, hardcover bestsellers, and a hugely popular app".

HOW MUCH THEY EARN PER FOLLOWER OR ENGAGEMENT
  • Itsines is estimated to earn $17.42 per follower. The calculation is provided in the strategy section.
  • As an additional insight, Itsines earned an estimated $17 million from her training app in 2016.

GENERAL ADVICE

HOW THEY USE THIS METHOD OF MONETIZATION
  • Influencers or micro influencers have discovered that brand partnerships can be unreliable sources of income, and as a result may rely on platforms - such as Patreon - to sell subscriptions, digital goods and merchandise.

HOW MUCH THEY EARN PER FOLLOWER OR ENGAGEMENT
  • According to Brittany Henessy, the average payment per Instagram post is $500 to $30,000.

CONVERSION RATES
  • Conversion rates differ widely, depending on the type of action, industry and landing page - but an average of around 3.1% is indicated for Instagram.
  • According to Hootsuite, engagement rates are one of the best predictors of conversion rates.

ENGAGEMENT RATES
  • As a rough guideline, the following interpretation of engagement rates is provided below. However, it should be noted that engagement rates tend to diminish with larger followings:
  • Less than 1% = low
  • Between 1% and 3.5% = average/good
  • Between 3.5% and 6% = high
  • Above 6% = very high

RESEARCH STRATEGY

In order to identify case studies that met the requirement for low and high conversion rates, a search was undertaken for a means to identify conversion rate data for specific Instagram influencers. The search included Instagram, social media authority sites such as Influencer Hub, and social media dashboard sites such as Hootsuite. However, influencers' conversion rates were not found. The reason for this may be that such data is considered sensitive information.

It was then decided that a proxy for conversion rates would need to be identified. Further research determined that engagement rates are a predictor of conversion rates; higher engagement rates typically yielding better conversion rates. Therefore engagement rates were used as a proxy for conversion rates. In order to calculate engagement rates, each case's Instagram profile was located and this was then used as input for the Phalanx engagement rate calculator.

No description of the exact calculations is provided on the Phalanx site, and so instead these were derived by observing the results produced by the calculator in response to varying inputs. The general CALCULATION is: (Number of engagements (likes + comments) / followers) x 100. The specific calculation for each influencer is as follows:

KAYLA ITSINES:

((34,984 + 217) / 11,759,430) x 100 = 0.3% (rounded to the first decimal place).

ARIELLE CHARNAS:

((34,266 + 421) / 1,259,341) x 100 = 2.8% (rounded to the first decimal place).

EARNINGS PER FOLLOWER

Earnings per follower were calculated as follows. CALCULATION: (Number of posts x potential earnings per post) / number of followers. The potential earnings per follower were calculated using the Instagram Money Calculator, with the lower boundary being selected to be conservative. Since the calculator does not provide a URL unique to each influencer, the specific calculations are provided below:

KAYLA ITSINES: EARNINGS PER FOLLOWER

(8,737 x 23,329) / 11,700,000 = $17.42

Instagram handle: kayla_itsines

ARIELLE CHARNAS: EARNINGS PER FOLLOWER

(7,506 x 2,499.75) / 1,100,000 = $17.06

Instagram handle: ariellecharnas

IDENTIFYING HOW EACH INFLUENCER MONETIZED

An extensive search of authority sites, business publications and social media sites was undertaken to determine what brand partnership monetization in relation to Instagram might mean. These included sites such as Influencer Hub, Forbes and Hootsuite. The results of this search are included in the general advice section.

Each individual influencer's background was examined by browsing their Instagram profiles in order to obtain a firsthand view of how they operate. In order to obtain contextual and historical details, business sites such as Forbes, technology sites such as TechCrunch and domain specific sites such as IconReel were investigated.

SELECTION CRITERIA

Companies and or influencers were selected in order to have at least one high conversion and one low conversion case study. As an additional criteria it was decided that the influencer would need at least 1 million followers in order to be relevant to a $20,000 per month target. Recent examples were sought - published in the past 24 months as additional research criteria.



Part
02
of three
Part
02

Instagram Monetization - Merchandise

In recent years, online merchandise and apparel brands, such as Gymshark and Asos, have generated sizable affects on brand awareness, sales, and profits. Using tactics such as Instagram influencer recruitment to serve as ambassadors, publicizing offline events on Instagram, generating user content in Stories, launching campaigns via Stories during critical retail times, and providing product IDs alongside product posts on Instagram, these two brands serve as case studies for successful increase in profitability using Instagram.

Gymshark

  • Gymshark, a small business founded by Ben Francis in 2012, has steadily grown to become one of the fastest-growing fitness apparel companies with customers in 131 countries.
  • In 2016, it was named the fastest-growing retailer in the United Kingdom (UK).
  • Various marketing strategies have contributed to Gymshark's success in generating £100 million (roughly $121 million) in sales in 2018 including use of influencers as brand ambassadors, connecting with customers both online and offline, involving customers in Stories, and employing strategic sales tactics.

Influencers as Brand Ambassadors

  • Gymshark first turned to Instagram influencers to expand its brand by contacting well-known fitness influencers, such as high-profile bodybuilders Nikki Blacketter and Steve Cook, and sending them free apparel in hopes that they would wear and promote the brand's products on their social media channels.
  • This strategy was successful, as brand ambassador promotion of products was correlated with a sizable effect on sales, and the brand went on to sponsor 18 influencers with a collective Instagram following of over 20 million users.

Offline Events

  • Additionally, Gymshark fosters a sense of community among its followers by connecting online strategies with offline marketing campaigns including expos and "meet-and-greets."
  • An expo "world tour" organized by the brand received a great deal of attention due to its widespread documentation on social media channels (including Instagram); however, due to the sheer size of followers who showed up, the event management was hectic and resulted in long lines.
  • Instead, Gymshark adapted its offline strategy to orient towards use of pop-up stores which are more contained in size by use of tickets and only select athlete appearances, adding an incentive to existing customers by adding an exclusive element to events.

User Content

  • Another tactic used by Gymshark on Instagram is generating content for its users and promoting content made by its users.
  • This tactic further fosters the sense of community among Gymshark's customers, by promoting videos and posters posted by users on its Stories using workout videos created by Gymshark athletes or wearing Gymshark apparel.

Strategic Sales Tactics

  • During Black Friday and Cyber Monday in 2017, Gymshark turned to Instagram for its marketing strategy during these crucial retail dates: creating a "BLACK OUT" campaign, complete with models wearing the latest items and user-generated content, which ran for two weeks.
  • Using a combination of Instagram ad products (e.g., ad Stories, dynamic ads) and complementary content, Gymshark reached 16.4 million users and 40% of sales during the time of the campaign were gathered from Instagram.
  • Gymshark also achieved a 6.6x return on ad spend during this campaign.
  • However, the site also experienced a shutdown for eight hours during 2017 Black Friday sales due to the sheer volume of customers.
  • Despite the shutdown, Gymshark rectified the issue by offering discounts to those who complained of the site crash.

Asos PLC.

Instagram Stories Advertisements

  • Asos was one of the first brands to employ use of Instagram Stories to generate ads in 2016.
  • Asos's willingness to experiment with new formats and featured through Instagram have been historically successful, as the first ad campaign through Instagram Stories reached 3 million followers, generated a 14 point lift in ad recall, and 3 point uplift in brand awareness.
  • Since then, Asos has praised use of Stories in increasing brand visibility and profitability.
  • The brand has grown a following of 16.5 million followers on Instagram, up 17% from 2017.
  • In fact, profit jumped by 10% to £29.9m (roughly $36.3 million) in half-year profits in 2018 as compared to the same period in 2017.
  • Nick Beighton, Chief Executive Officer at Asos, has praised the Instagram-effect as being the driver for the company's drive in profit, noting that popularity among 20-somethings on the platform has surpassed that of Facebook.
  • Content on Instagram for Asos was viewed 30 million times in 2018 while videos on Instagram Stories were viewed 52 million times, up by 40 million since 2017.
  • In light of Instagram's newest shopping-enabled advertising feature in 2018, Asos is experimenting with digital efficiencies and has since reduced ad spend from 5.3% to 5.0%.
  • However, in the United States, the pay-per-click (PPC) cost has risen dramatically, posing a challenge to Asos' digital advertising strategy in the North American market.

Shopping-Enabled Advertisements

  • Beighton noted that the shoppable feature on Instagram could be potentially risky and that Asos would rather keep consumers on the website though he is willing to experiment with the feature over the course of 2018.
  • In reality, only 2.6% of the 63.2 million Asos.com's United States visitors buy products from the site and 89% of visitors do not engage.
  • Despite traditionally low conversion rates on Instagram, companies such as Asos have employed additional shopping strategies to successfully improve conversion rates.
  • Asos adds item IDs to product images posted on its Instagram account to incentivize sales among its followers, who primarily use social media to socialize, to avoid low conversions.
  • Overall, Asos has been successfully growing through its use of digital advertising through Instagram: site visits increased by 25% year-on-year, average order frequency improved by 8%, average basket value increased by 2% and there was a 10 base point improvement in conversion.


Part
03
of three
Part
03

Instagram Monetization - CTR

In Q1 2018, the click-through rate (CTR) on Instagram was 0.52%. By Q3 2018, CTR for ads on Instagram reached 0.67%. The improvement in CTR in Q3 was mainly driven by an increase in advertising spend by up to 177% from the previous year.

Analysis of the CTR on Instagram

2018 CTR Analysis

  • After a drop in Q4 2017, the click-through rate (CTR) on Instagram rose back to previous levels in Q1 2018, showing a 41% boost in YoY performance.
  • In Q1 2018, Instagram reported a big increase in engagement especially among younger audiences.
  • In the Q1 2018, the CTR on Instagram was 0.52%.
  • A study by Pew research shows a 35% jump in social media usage on Instagram compared to 28% who reported using it two years ago.
  • The study further shows that 71% of 18-to 24-year-olds and 54% of 25- to 29-year-olds are on Instagram.
  • In Q2, the CTR on Instagram rose to 0.62%.
  • In Q3 2018, the median CTR for ads on Instagram decreased in comparison to other platforms.
  • However, the number skyrocketed from where it was the previous year, maintaining the upward trajectory it had picked two years back.
  • In Q3 2018, CTR for ads on Instagram was 0.67%.
  • The improvement in CTR in Q3 was mainly driven by an increase in advertising spend by up to 177% from the previous year.
  • Instagram’s commitment to building out its advertising platform, paired with the announcement that the platform had reached one billion users, attracted more brands and marketers to the app.
  • In Q4 2018, budgets allocated to Stories increased by 124% year-over-year and 94% quarter-over-quarter.
  • CTR, cost per thousand (CPM), and cost per click (CPC) rates for Stories also increased rapidly in Q4 2018 as compared to Q4 2017, with CTRs jumping by 52%, CPM rising to 112%, and CPCs growing by 39%.

2019 CTR Analysis

  • In Q1 2019, Median CTR for ads on Instagram was 0.55%, representing a 0.07% drop from the previous quarter.
  • It was close to where it landed the same time last year (0.52%).
  • Despite the drop, in Q1 2019 marketers reported pleasing results from Instagram Stories and many started reallocating budgets to boost success.
Sources
Sources

From Part 02
Quotes
  • "The online retailer today (11 April) reported stellar sales for the six months to 28 February, noting a 10% rise in half-year profits to £29.9m as sales jumped 27% to £1.13bn compared with the same period in the previous year."
  • "The brand's content on the site was viewed over 30m times while videos were viewed more than 52m times, up from 40m in the previous half of the year."
Quotes
  • "As users access social media platforms to socialize, not to shop, it takes extra steps to drive them from social browsing to a buying mindset. ASOS addresses it by putting an item ID next to the Instagram image"
From Part 03
Quotes
  • "After a drop in Q4 2017, the click-through rate on Instagram is back up to the previous levels, showing a 41% boost in YoY performance"
Quotes
  • "Though median CTR for ads on Instagram is low in comparison to other platforms, the number has skyrocketed from where it was last year and has been on a steady uptick for the past two years."
Quotes
  • "Median CTR for ads on Instagram dropped 0.07%, and is close to where it landed this same time last year."