Instagram’s App-Based Ad Revenue Is Being Fueled by Money From Startups

45 percent of advertisers received VC funding in past year

Two years ago, Instagram CEO Kevin Systrom was notorious for personally vetting each and every advertisement that ran on his photo-sharing app. Boy, have times changed. Since opening up a full-blown ad business last fall, Facebook-owned Instagram is pulling in lots of money from more than 200,000 advertisers, including brands that push app-install ads on the platform.

According to a new report from analytics company Sensor Tower, roughly 45 percent—or nine out of 20—of Instagram's top app advertisers collected venture-capital funding in the past year. The report tracks ad spending from campaigns across 20 networks. (Earlier today, Facebook reported a 57 percent year-over-year increase in ad revenue, bringing in $5.2 billion in the first three months of 2016.)

The Instagram advertisers that received venture-capital funding include shopping apps Wish, Mercari and 5miles. Outside of the apps that brought in venture-capital money, Amazon and Clash Royale poured the most money Instagram ads.

Sensor Tower also measured share of voice on Instagram, which tracks how spending across categories like gaming, shopping, lifestyle and entertainment stack up against one another. 

Game apps made up about 30 percent of Instagram's share of voice while shopping made up more than 20 percent. Social networking, lifestyle, finance, and health and fitness each generated less than a 10 percent share of voice score.

On Facebook, five of the top 20 app advertisers received venture-capital money in the past year. The top five app spenders overall were Mobile Strike, Marvel: Contest of Champions, HBO Now, Wish and Game of War.

The firm also analyzed how many Facebook ads featured photos versus video. In March, roughly 35 percent of ad impressions came from video ads, while 65 percent came from still image-based ads. Those numbers are up from January, when video made up about 25 percent of ads and photos accounted for 75 percent of impressions.

Video ads on both Facebook and Instagram made up 29 percent of all ad impressions during the first quarter of 2016.

When it comes to Google AdMob app advertisers, Amazon, Mobile Strike and Google's own app topped the list. And on Tumblr, the games Episode and Magic Jigsaw, and shopping app Poshmark poured their money into the Yahoo-owned site.

Within Pinterest's mobile business, Sensor Tower looked at both app and mobile web advertisers. Forty-two percent of ad spending went toward the site's 15-month old 'App Pins' feature that surfaces app-install ads in search results, while 58 percent of spending went to web campaigns. Interestingly, only three of Pinterest's top advertisers raised venture-capital money in the past year.

Sixty-five percent of spending on Pinterest campaigns came from shopping apps, with Etsy, Thredup and Macy's contributing the most.

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