Why Videos on Instagram and Vine Will Fail to Monetize

Posted on: June 21, 2013
Posted in Mobile, Social

Vine Insta

This post was originally published on Medium.

Yesterday there was a lot of idle speculation that a 15 second video format will somehow transform Instagram into a massive moneymaker for Facebook. And that because advertisers may re-purpose ads generated for other mediums on Instagram and Vine, FB and Twitter will start printing money.

This couldn’t be further from the case.

To really look at the unit economics around advertising on Vine and Instagram we need to look at owned media vs paid media and how social is evolving on mobile, which is drastically different than web.

“Paid media” is basically advertising. It can take numerous forms, but think about it as a mix of ads that an agency steers a brand to buy—e.g. pay for a promoted post, buy a banner ad, or run a FB promotion to acquire fans.

“Owned media” is totally different and is the major unsung hero for brand advertisers on the social web. Owned media is named as such because any brand can claim their free “page” on the network, post content, and amass a following—just as brands historically claimed their FB fan page or their foursquare venue page. Note that attracting fans is much more complicated now on FB for reasons I’ll describe below and 4sq is starting to charge merchants to claim their page.

Here are some great examples of brands already killing it on Vine and Instagram with owned media:

This fashion oriented Vine appeared in my empty stream at sign-up as an Editor’s pick. This sequence of a model changing showcases how creatively brands are using the 6 second medium. Is this the model’s personal feed? The photographer’s? Does the clothing brand that’s mentioned own this? The reality is any could apply.

Another great example is Lululemon, which posted this yoga video (hello production quality) at Instagram’s video launch event, which means their digital team was already working with FB ahead of launch. The video has already attracted 20K+ likes, but Lululemon doesn’t have to pay to post because they own their own media / page on Instagram.

Fan pages on Facebook were the first major example of brands claiming and owning media on a social property—it was completely free initially for a brand to reach their fans. However over time this changed…

Facebook wanted to start collecting money against the owned media they gave for free so they effectively made brand marketers dedicate part of their media buy to paid fan acquisition—about 50% of the ad spend on FB (by brands) has literally been to “buy likes”. Over the years this pitch has become increasingly questionable, particularly as FB began using Edgerank to filter out brand updates to the users who self-declared as fans. Huh?

Facebook did this so they could ask brands for more money in order for their updates to actually reach the fans they paid to acquire. Plenty of people were irate about this, most vocally Mark Cuban of the Mavericks who could no longer post an update that would actually reach his own basketball fans!

The looming question in mobile is how Instagram and Vine are going to make money if brands already own so much media on the platforms. You and your friends are organically becoming followers of these properties without being duped into liking to win something (as happened on FB). A perfect example of this is Nike, which has attracted more followers on Instagram than on Twitter, in about 1/3 the time.

Nike is killing it. Storytelling is visual and emotional when done right as this video shows (they published this minutes after the Heat won game 7). This content is way better than advertising, Nike controls it, and Instagram makes nothing…

The reality is brands are getting much better about content… This is because it’s been instilled in their minds that they need to be curators. Social is literally built around curation. It’s part of how people and brands define themselves.

This means that their appetite to buy media on these platforms is going to be severely dampened. Sure, an obvious native ad unit could be a “promoted video” or something that appears in stream for the user 1 out of every x posts. But to assume that a brand will actually pay for this right now is silly. Brands own so much free media on these platforms that they’ll make Twitter and Facebook prove a certain ROI before they start forking money over.

And in the meantime they’ll create and curate content (which they’re getting good at ), with help from companies like NewsCred which are making a business out of this.

It’s a complex world ahead for both Twitter and Facebook to monetize video (and all of mobile). To think that they’re anywhere close to monetizing a 4” feed with branded video is silly. It’s simply way too early to see a clear analog between the FB banner ads on web that asked you to become a fan and what may happen on a cluttered feed on a 4” screen.

The tension between these companies making money from their customers (advertisers) and preserving YOUR user experience is going to grow. And it’s very likely that FB and Twitter will severely struggle with monetizing unless they sell bunches of data to advertisers and target the hell out of content posted by users.

And YES all this relates back to your privacy settings and whether you are targeted across platforms. Video opens a a new world in mobile advertising but thinking that 15 second pre-rolls are going to earn these companies TV-like advertising dollars is foolish. Nevertheless this tension to monetize is only going to grow as all this unfolds.

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