How Instagram May Affect Facebook Ad Prices

While Facebook CPM rates have reportedly increased 41 percent in the last year, the digital giant’s Instagram acquisition could make its ads even costlier.

Facebook purchased Instagram for $1 billion last week, setting off speculation about how the new property may affect future monetization efforts by CEO Mark Zuckerberg’s company as it prepares for its IPO. Janet Sternberg, communication and media studies professor at Fordham University, thinks Instagram may drive up Facebook ad prices while also making it more attractive to brands.

“These new indirect connections to social media systems beyond Facebook will allow Facebook to claim even wider reach and larger audiences for advertisers,” she told ClickZ via email. “Keeping Instagram as a separate system allows Facebook to place ads in two different social media venues, thereby doubling the potential visibility and giving advertisers a ‘two-for-one’ bargain.”

Keeping Instagram as an individual product also may essentially create a two-pronged ad network, Sternberg said. “Facebook can potentially offer discounted rates to advertisers for bundled deals to place ads across social media venues,” she said. “By acquiring Instagram’s expertise in mobile data sharing, Facebook also can stay at the leading edge and help drive innovation in the growing field of advertising for mobile devices.”

When asked to respond to Sternberg’s assessment, Menlo Park, CA-based Facebook declined to comment.

But the professor may be on to something. Roger Katz, CEO of social marketing provider Friend2Friend, said marketers have been increasingly looking to marry Instagram efforts to Facebook. He pointed to a recent initiative from client New Belgium Beer.

“There’s a new trend we’re seeing among our clients for interest in bridge-building audiences on Facebook with their fans on more niche social channels such as Instagram, Pinterest, and Pandora,” Katz said. “There are a number of benefits associated with doing this. First, by exposing their Facebook fans to their smaller network – such as those on Instagram – it allows the brand to quickly grow their number of fans on the smaller network. Second, the company’s Facebook fan page also benefits, by providing additional shareable content that can be used on Facebook.”