Instagram shopping could be worth $10B to Facebook
As Instagram rolls out new shopping features, one Wall Street firm says the app’s burgeoning e-commerce platform could become a major revenue stream for its parent company, Facebook.
Beginning this week, Instagram will allow users to buy products featured in posts from a select group of its top “influencers,” including Kim Kardashian West, Gigi Hadid and GQ magazine, without leaving the app. The test run builds on Instagram’s previous shopping initiatives, including the launch last month of a “checkout” that allowed U.S. users to buy featured products from top brands.
“Instead of taking a screenshot or asking for product details in comments or Direct, you can simply tap to see exactly what your favorite creators are wearing and buy it on the spot,” Instagram said in a blog post explaining the feature.
Direct shopping on Instagram gives Facebook another way to monetize its massive base of users. The photo-sharing app has more than one billion monthly active users.
Instagram e-commerce could draw $10 billion in revenue for Facebook by the year 2021, or roughly 10 percent of the platform’s advertising revenue, Deutsche Bank analysts said in a note to investors last month.
“We understand Facebook is investing heavily behind this as a priority, and we expect an influx of brands and retailers making their content "shoppable". We see potential for momentum to carry over to core Facebook and Marketplace and potentially even via a standalone shopping app (similar to splitting Messenger),” the analysts said.
Aside from boosting user engagement on Instagram, the firm said the app’s “checkout” feature will drive revenue in the form of transaction fees and new advertising.
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Top brands participating in Instagram’s e-commerce beta include Adidas, Burberry, Nike and Zara.
