Instagram Takes Another Step Toward E-Commerce

Has its eye on click-to-shop ads

In its slow but steady embrace of e-commerce, Instagram is running its first marketing campaigns that transform viewers into shoppers with a single click. Finally, retailers can link to product pages from their Instagram ads—a feature Banana Republic was among the first to employ—and still more sophisticated ads are in the works.

The new ads are part of a carefully managed rollout of better marketing tools on the Facebook-owned photo-sharing app, which is starting to offer the sort of products brands have been demanding, especially in view of the $200,000 many of them are shelling out. And that's just the entry fee for buying ads on the platform, according to digital marketing executives familiar with Instagram's business. (Instagram declined to comment for this story.)

"Instagram continues to tease big things coming," said one Hollywood marketing executive who buys ads on the platform. "And they're talking about more ways to integrate buying."

Another ad executive revealed that, instead of a "Buy" button, Instagram would allow marketers to more easily link to checkout pages online. Yet even that step is a complicated undertaking, given that the app is largely a mobile experience.

Instagram's first linking capabilities have been available since March when it launched carousel ads that let brands post slideshows of images that end with a button for viewing additional content. Banana Republic used its link to take viewers to a product page. It was the first time a retailer was able to send consumers directly to where they could buy products they saw in an Instagram ad.

"We've been thrilled with all the features we've been participating in and plan to continue using the new tools as they become available," said Banana Republic's head of customer experience Aimee Lapic. "A direct connection to shopping would be a great new tool that, of course, we would love to participate in, as it makes the customer experience that much easier."

Sources reveal that more tools like this are on the horizon. Instagram is said to be considering a number of ad formats that could prove game changers for brands, similar to how Twitter built highly customizable ad cards that send users to products with ease.

But because these changes would signal a fundamental change to how marketers use and customers experience the platform, Instagram is proceeding with caution, no doubt wary of displeasing its growing user base (now upwards of 300 million).

Instagram introduced its first ads in late 2013 and since then has tried to maintain an image as a place for glossy campaigns as opposed to direct-response, click-driven efforts. The high price to advertise there is a reflection of the platform's self-fashioned air of exclusivity. "We're paying a premium on Instagram ads," the Hollywood executive said. Video ads are especially pricey, going for as much as $30 per 1,000 views, according to sources.

Instagram is even attempting to get brands to rethink what success looks like by providing campaign data, aiming to prove that impressions boost sales more than garden-variety clicks.

"They're trying to make it possible to do attribution even where there isn't a digital trail because they're keen on proving that it's not about the clicks," said Justin Kistner, vp of marketing at Mixpo, a social media marketing firm. "Facebook wants to be able to look at some of its newer properties like Instagram and WhatsApp and monetize those with simple impression-based advertising to protect the user experience."