Six Pixels of Separation - The Blog
March 20, 2014 4:47 PM

Are Brands Ready For The Instagram Economy?

When you hear the name Instagram, what do you think of?

For most brands, when they think of Instagram, three ideas probably enter their noggins: 1. The fact that the company got bought by Facebook in back in April 2012 for about one billion dollars (it still stings for most). 2. That there is currently no dramatic sign of advertising or marketing on this platform (making it difficult for brands to figure out an angle). 3. The opportunity to add more pictures to a social media experience (without knowing what the ROI might be). What if there was a way - a real way - for brands to make money (serious money) on Instagram?

Is Instagram the future of e-commerce?

Back in August 2012, I penned an article for the Harvard Business Review titled, Does Your Company Need an Instagram Storefront? It turned out that there was a burgeoning cottage industry being built in places like Kuwait for businesses that were interested in doing more on Instagram than selfies, regrams of people twerking or motivational quotes. Small business owners had begun posting pictures of products (and sometimes services) along with a short description and price. They augmented their Instagram descriptions with links to PayPal or Square for the handling of the actual transaction. If that weren't entrepreneurial enough, they included tools like WhatsApp (which Facebook also recently acquired) to facilitate live chat and customer support. If you're thinking that this sounds like small potatoes, you may not be thinking this through as thoroughly as you should be. Back in Kuwait, there are now businesses making millions of dollars with their Insta Businesses, and the trend is now taking hold in North America.

A new form of commerce that makes perfect sense.

Would you believe that twenty to forty percent of Fox & Fawn's revenue now comes from their Instagram business? They have two locations in Brooklyn, New York that focus on vintage clothing. They're not even as sophisticated as some of their counterparts in Kuwait. They're not using online merchant accounts or chat/messaging apps. If you see something you like on the Fox & Fawn Instagram feed, you simply leave a comment and then phone your order in with the store. Last week, The New York Times picked up on this innovative form of e-commerce with the article titled, On Instagram, a Bazaar Where You Least Expect It. Connie Wang runs a fashion site called, Refinery29, and had this to say in the article about Instagram's business potential: "It's so much more personal... It's not a Facebook or Twitter where everything seems like an advertorial. On Instagram, it feels like a discovery because you aren't there to shop -- but if something catches your eye and it's available, you're more likely to buy it."

Sounds great for the local merchant, but does it scale?

It seems like a no-brainer for small business and local merchants, doesn't it? No need to invest in a hefty Web build that will need shopping cart software, merchant accounts, social media extensions, search engine optimization and more (plus, the cost of driving traffic to a destination site, instead of simply being active in a social media environment that already has traffic and interest). Couple that with the ability to alternate and merchandise in near-real time, and this is about exciting and lean as it gets in terms of mobile commerce that can scale. What about major brands? From testing the opportunities of e-commerce directly with consumers, to launching specific product lines that may not require all of the functionality and control of a full blown-out e-commerce platforms, the possibilities seem endless. There are countless major brands that could use these types of channels to sell accessories and add-on products. If you're Apple, you could use a unique Instagram feed just for iPhone cases or one for cables (you get the idea).

This is, hopefully, the beginning of something new.

Strategically, an Instagram business makes sense for any brand that wants to test the waters on both a commerce and merchandising front. Even applying some level of performance-based advertising (Google AdWords, Facebook ads, promoted Tweets, etc...) against an Instagram feed can help a brand gauge the level of consumer interest, while helping a brand to better understand what gets people to talk about something (or ignore it). So, what happens when Instagram catches on to this burgeoning form of commerce? According to the New York Times article: "Instagram executives say they have no plans to halt e-commerce on the site, so long as a seller doesn't violate the company's terms of service by, for example, engaging in spamming. But Instagram has struggled to figure out how to make money. Its own early dabbling in advertising has been rocky, and has not progressed past a testing phase."

It seems like now would be the ideal time to stake some claim to this land, if you're looking for an innovative way to sell to consumers online.

The above posting is my monthly column on marketing innovation for Strategy Magazine. I cross-post it here with all the links and tags for your reading pleasure, but you can check out the original version online here:

By Mitch Joel