Instagram not an instant solution for Facebook sick

SAN FRANCISCO (Reuters) – Facebook Inc.'s revenue forecasts ( FB.O ) that alarmed investors, fueling the worst day of its actions on Thursday, add to the pressure on its Instagram unit to win over more buyers of ads that have long found success on the company 's flagship application.

Users of & # 039; Instagram and Facebook see about the same number of ads, but Instagram Advertising prices are half of what Facebook charges because of the limited number of advertisers vying for spots on Instagram , according to four buyers of ads.

Investors were banking on Instagram revenues to overcome the decreasing use of Facebook's main application. But the gap that he needs to fill has widened earlier than expected.

The social media company suffered the biggest single-day collapse in US stock market history, losing more than $ 120 billion in market capitalization, stocks falling 19% per day regulatory pressure about privacy.

Instagram users are not used to clicking links in messages, which makes the service less effective for generating online shopping than Facebook, says Erik Huberman, founder of the agency Hawke Media.

Ad ratings are lacking compared to Facebook, he added.

"There are fundamental issues with the platform … which means that any type of modern marketing would hesitate to increase spending on Instagram," Huberman said.

Facebook advertisers are seeing lower results on Instagram, according to advertising buyers. Others have been blocked by the top bar for catchy content on Instagram and a general malaise among advertisers on a newer service, advertisers said.

"Many companies do not place ads on Instagram because they do not have the content to play on Instagram," said David Herrmann, director of advertising at Social Outlier, which spends nearly $ 15 million each quarter. Facebook ads on behalf of customers. "A local flooring company will not seduce Instagram, like Facebook."

Instagram is the slice of revenue for its fastest-growing parent company, but it attracts 4 million advertisers a month on a global scale. As Instagram aired more ads, the average price per ad for the entire Facebook app family declined in two consecutive quarters after a year of hike. A new law on the protection of privacy in Europe has also affected prices.

Latest results have pushed Scott Devitt, an badyst at Stifel, Nicolaus & Co, to lower the Instagram business figure of 2019 to $ 13 billion, up from $ 14.64 billion, with lower forecasts price and views.

Instagram and Facebook declined to comment on this story.

The company's executives have reasons to be optimistic. The average price of an advertisement viewed 1000 times was $ 4.70 on Instagram in the second quarter, twice as fast as the standard ads on Facebook compared to the previous quarter, according to data from the marketing firm Kenshoo. According to Mark Smith, of the True Interactive ad buying agency, which invests $ 25 million a year on Facebook and Instagram for clients such as Redbox and Montage Hotels, Instagram has been working for advertisers seeking an attractive name or video content.

New features for users and advertisers, including the replication of an advertising design tool Snap Inc. ( SNAP.N ) launched last year, could help reduce the apprehension of other advertisers, said Chris Costello, senior director of Kenshoo's marketing research.

Earlier this year, Instagram introduced options that automatically formalize advertiser videos and allow them to have multiple photos in an ad. But companies must always have better content than Facebook to get noticed, Costello added.

Tom Buontempo, chairman of the advertising agency Attention, said the first step is to entice more companies to open free Instagram accounts, which is necessary to advertise.

"Surprisingly, there are still a number of advertisers who have not exploited the potential of Instagram's advertising products," he said.