Will Instagram crack the local commerce code?

When Facebook purchased Instagram for $1 billion in 2012, skeptics questioned whether the world’s largest social network would ever recoup its investment in the fast-growing but still-unmonetized photo sharing app.

Some five years later, Instagram has continued to grow like a weed and what’s more, under Facebook’s ownership, it has become one of the most popular social platforms for advertisers.

And Instagram’s appeal isn’t limited to big brands. Thanks to its growing popularity with small businesses, the service recently announced that it has surpassed the one million active advertiser mark.

Instagram’s appeal with advertisers isn’t hard to explain. With more than 600 million active users, it’s one of the most popular social apps in the world. And with more than 80% of users following at least one business on the service, business owners can be somewhat confident of an opportunity to reach Instagram’s users if they employ the right strategy.

Interestingly, while many of Instagram’s early ad offerings were targeted at brand advertisers, the company is increasingly focused on serving the small businesses that have flocked to its platform.

As part of that, Instagram says that it will soon add a feature that gives local businesses the ability to let their followers book appointments without leaving the app. According to Instagram advertising chief James Quarles Instagram, the goal is to allow Instagram to function as “a primary storefront for the businesses.”

Cracking the local commerce code?

Assessing ROI is frequently cited by companies as one of the biggest challenges they face in social, and this is a particularly big challenge for many small, local businesses that don’t have the savvy, tools and budgets that brand advertisers have.

Building ad offerings that allow business owners to transact with their customers without leaving the Instagram app could go a long way towards helping Instagram solidify its relationship with the hundreds of thousands of small advertisers, many of them local businesses.

Ad offerings that produce tangible results, like appointment bookings, can demonstrate value without requiring that advertisers jump through hoops to quantify the value.

This could also help Instagram’s efforts to stay ahead of perhaps its biggest competitor, Snapchat. Already, there’s evidence that Instagram’s advertiser-focused approach, which differs from Snapchat’s, is paying dividends.

According to a recent study conducted by RBC Capital Markets and AdAge, 65% of advertisers are interested in investing in Instagram ads while just 40% are interested in advertising on Snapchat.

If Instagram can win over small, local businesses, that could give it a sustainable edge over its younger competitor. But it could be on a collision course with a much larger company – Google – which just announced that Reserve with Google, a tool for booking fitness classes and spa appointments, is now available across the U.S.

After years of talk about the potential of the internet to help local businesses, it seems as though major ad players are closer than ever to serving this group meaningfully and on a large scale.

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