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3 Factors That Are Driving Instagram Ad Spending Growth

In the last few months of 2020 leading up to the holidays, people across the country craved connection with their friends and family more than ever. With users on their phones at home and no longer out on the streets, businesses were forced to invade the digital space more than ever to ensure their messages were reaching people when they might have relied on out of home advertising previously.  

In the Q4 Digital Marketing Report, Merkle saw that advertisers rose to meet this challenge, shifting media spend across different platforms to best meet their audience. While users were scrolling their social media feeds checking in on news and family, Merkle noted that spending on Facebook ads increased 12% Y/Y in Q4 2020 and more drastically, Instagram ad spending increased 30% Y/Y.

Despite Instagram continuing to receive the minority of spend against Facebook (Instagram received 20% of total Facebook budgets in Q4 2020), the trend of increasing Instagram spend YoY is clear. This can be attributed to three different factors:

  1. Instagram usage is growing more than other social platforms
  2. Social commerce increased on Instagram during the holidays
  3. The rise of influencer marketing

The Growth of Instagram Usage

Attributed to the shift in digital user behavior seen during the COVID-19 pandemic, global Instagram users reached 1 billion for the first time in the app’s history. With the US being Instagram’s largest market, the result is the notable increase in spend Merkle has seen amongst its advertisers. As businesses rush to gain their share of wallet on the platform and increase overall reach, more budget allocation is shifted to Instagram.

Across Facebook’s owned apps, there was an increase of 15% YoY in daily active users (up to 2.6B) and 14% increase in monthly active users (up to 3.3B) within Q4 2020. This showcases Instagram as the platform for advertisers who want to increase their reach, while not needing to compete as ferociously as needed on Facebook’s oversaturated newsfeed. In 2020, there was not only a jump in the number of users on the platform, but also a jump in how long each user spent on the platform. For Instagram specifically, between 2019 and 2020, the average time spent per day with Instagram increased 18.4%. This means more opportunities for ads to be displayed in each user’s feed.

Social Commerce on Instagram

To encapsulate the growth of eCommerce behavior as a result of COVID-19, Nicola Mendelsohn, the VP of EMEA at Facebook stated2020 has shouldered a decade’s worth of behavior change”. The pandemic has clearly caused shifts in shopping habits and, in turn, the way people choose to shop.

In previous years, the mall was the central hub for holiday shopping, with many advertisers relying on drive-to-store campaigns during the holidays. This year, those same advertisers needed to make up for the lack of foot traffic by amplifying eCommerce campaigns. If business still relied on in-store revenue, there needed to be an amplification of messaging around “contact free”, “curbside”, and “home delivery”, best magnified by a digital campaign. Customers were prepared for this shift in shopping experience, with conversations related to contactless shopping up 10x in the US since the beginning of the pandemic and retail social commerce sales increasing by 19.8% from 2019 to 2020.

For smartphone veteran Instagram, it’s also important to note that the majority of e-commerce growth has been happening on mobile devices. Mobile e-commerce sales are projected to grow by 19% worldwide in 2020, accounting for 65% of total e-commerce revenue. Instagram’s history of innovation in the smartphone world has allowed the app to usher in new shopping features swiftly, taking advantage of when users need these features most readily. As an example, right before Christmas, Instagram rolled out a shopping feature on the new Reels format within the platform. This accelerated e-commerce on the App, with shopping features now available in every format on Instagram: Feed, Stories, IGTV, and Live.

Rise of Influencer Marketing

Perhaps more than any other year, advertisers caught on to the value of influencer marketing. With friends socially distant and travel locked down, users turned to their phones for recommendations and inspiration. This is where influencers came in, engaging their followers in ways to brighten up their lockdown whether through sharing their favorite comfy lounge wear, new recipes to try, or self-care skincare tips. In 2020 alone, the influencer marketing industry is set to grow to $9.7B (a 49% YoY increase), with the average earned media value per $1 spent increasing to $5.78.

With Instagram being the marketing platform of choice for influencer campaigns, an increase in influencer spending YoY has translated to an increase in Instagram spending. The ease of photo sharing and editing on Instagram made way for a rise in niche, micro-influencers, and this surplus of potential influencers lowered the price tag for brands to have an entry way into influencer marketing. In 2020, 69% of marketers stated they plan to spend the most money on Instagram for influencer marketing this year and 78% of marketers stated that Instagram posts are the #1 choice for influencer content forms As more brands test into influencer strategies, and the brands with tried-and-true influencer campaigns expand their footprint, there will be a correlation in Instagram spend increasing.

 

With these three factors continuing to influence Instagram spend into Q1 2021, advertisers should evaluate their share-of-voice on the app and identify any untapped marketing opportunities. If your business has goals for growth within Social Commerce or Influencer Marketing in 2021, increasing investment on Instagram would be a competitive decision as the platform continues to grow.

To read more about trends on Instagram, Facebook, and other paid social channels, download our Q4 2020 Digital Marketing Report here.

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