Instagram to Start Experimenting With Advertising

Sept. 9, 2013— -- It's been over a year since Facebook bought Instagram for $1 billion. Thanks in part to Facebook's popularity, Instagram now has over 150 million users. But what did Facebook get out of the business deal?

Not all that much in terms of revenue so far, according to the Wall Street Journal, which reported that Facebook may be asking Instagram to start earning its keep. Emily White, a former employee of Facebook who now serves as Instagram's director of business operations, has said that the photo service could start selling ad space sometime next year.

Several brands have used Instagram for marketing purposes, but the service itself is free and does not explicitly sell ad space. However, Instagram has flirted with the idea of advertising before.

Late last year, it updated its terms of service, sticking in a clause that signed away ownership of Instagram photos from its users and allowed advertisers to use said photos. Shortly afterwards, the company backtracked and reverted to the old terms of service.

When Instagram was first released about three years ago, the company didn't need to worry about how it would eventually make money. Brian Wieser, a senior analyst at Pivotal Research, said that it's similar to the business models for other digital products and services "Getting ubiquity first and revenue later is perfectly appropriate," he told ABC News. "Twitter wasn't seeing any revenue early on, and it wasn't necessary back then."

But the time when Instagram doesn't have to worry about monetizing itself might be coming to close. "Facebook made an investment in the platform that Instagram built," said Wieser. "At some point, Instagram needs to generate revenue." Instagram confirmed with ABC News that previous reports of their advertising plans were accurate and that users can expect ads in the next year or so.

Instagram may need to find a way to advertise, but that doesn't mean that they'll immediately start spamming people's feeds with sponsored content. "When a company first chooses to monetize, the ads need to be both unobtrusive and native to the platform," said Wieser. "Instagram is at a stage where they're going experiment with different ad products."