How *does* Instagram make money?

Earlier in the week, one of our students asked, “How does Instagram make money?” It’s a good question: how do they?

Short answer: they don’t. Longer answer: they will at some point, and sometime soon there will be ads. Here’s a Wall Street Journal article that features an interview with Emily White, Instagram’s director of business operations.

“There are no ads on Instagram, but Ms. White said it should be ready to begin selling ads within the next year.

Her challenge is to figure out how to integrate marketing without jeopardizing Instagram’s cool factor.

‘We want to make money in the long term, but we don’t have any short-term pressure,” she said.”

Nice place to be, right? Wouldn’t you like Facebook to give you a billion dollars and then say, don’t sweat the small stuff—just figure it out at some point?

This article from MSN Money from earlier in the summer talks about Instagram and advertising. The videos they’ve introduced will eventually show 15 second ads. But Wall Street wasn’t pleased with that idea, and the stock price went down.

But another article in AdAge (a good site to read if you’re thinking of going into advertising or PR) suggests that Facebook is already profiting from Instagram. It’s convergence culture in action, it’s fragmented and networked devices put to use. States the AdAge piece:

“As it turns out, Facebook can make money from Instagram by charging brands on Facebook, where ad budgets are already growing aggressively, especially on mobile.

It’s as simple as this: brands create Instagram videos, share them to their Facebook pages and then boost them into paid media that hits the Facebook Newsfeed, in the same way that they boost text or photo posts. This enables brands to reach Facebook’s 818 million monthly active mobile users, which dwarfs Instagram’s 130 million. It’s profiting from Instagram without having to advertise on Instagram.”

Curious to know what you think of these types of moves. Does it make sense that Facebook bought Instagram? How successful do you think it is?