How does Instagram make money?

Back in 2010, when Facebook was at its prime and ruling social media, Instagram made an entry and has rapidly gained popularity. Only in two months, around 1 million people have registered. Cool, right? Just in a year, they had 10 million users

In April 2012, Facebook acquired this new social media sensation for around $1 billion in stocks and cash. But once Facebook brought this platform they didn’t merge it with Facebook. They have planned to grow it independently and they did a good job at it. 

Story behind Instagram

Do you have an Instagram account? Oops!!! Wrong question. In a day how many times do you check your Instagram account? More than 2 times right. If there are still people out there who don’t know what Instagram is let us make it clear. 

Instagram is one of the most popular social media platforms that is a video and photo-sharing platform. It is owned by Facebook. This platform allows users to capture, edit, and upload videos and photos. You can interact with other users by using Like, Share, Comment, and the chat feature. In this platform you can follow other users, influential people to know what’s happening in their daily lives. Not to forget the influencers are using this platform to improve their traffic and promote the products of different brands.

In 2020, the founders of Instagram Kevin Systrom and Mike Krieger have unleashed this photo-sharing platform. They also didn’t know the potential of this platform at that time. It is not an exaggeration to say that it is quite hard to imagine our world without Instagram today. Come on, do you think your pictures would have looked the same without the square format or amazing filters. Your Instagram feed is filled with Amateur photography and more people are taking an interest in taking pictures. You would have also uploaded a few beautiful snaps of yourself or the nature around you. One can say that Facebook made it easy for us to communicate and meet our old friends. But Instagram came along and made people realize that they need a platform to share photos and videos too with these amazing filters. 

The stats of Instagram

Instagram has around 1 billion monthly users and around 31% are aged between 18 to 24. Around 34% of the users are aged between 25 to 34. This platform has daily active users of 500 million. So you imagine the number of people that are using this platform daily. This is one of the main reasons why companies are coming to this platform. It not only brings them closer to their audience but it also helps them in reaching their target audience and understand their preferences. But as you know that many influencers on Instagram are making money by promoting their products or brands. But have you ever wondered how Instagram makes money? If yes, then stick till the end to find out how this platform earns money.

The secret of money-making 

Although this is a free image sharing platform, over the years the way it uses its algorithm to make money has evolved. Instagram’s business model has been the same through all these years. As you already know the major source of revenue for Instagram like Facebook is through advertising. More than 70% of people find new products or brands on Instagram. Do you see the power of Instagram? The brands love this platform because most people are using this platform to not be left behind. And these users are the major source of income for the brand as they buy the products.

So as you understood already the platform uses these interactions to make money through shopping and advertisements.


As you already know, Instagram makes most of its revenue through advertisements. By 2021, this platform will bring around 40% of the ad revenue for Facebook. According to Instagram’s recent blog, Around 2 million advertisers are advertising on Instagram every month. Instagram offers different advertising services in different formats. 

  • Story Ads
  • Video Ads
  • Photo Ads
  • Carousel Ads
  • Collection Ads
  • IGTV Ads
  • Ads in Explore
  • Shopping

Story Ads

If you’re familiar with Instagram Stories, then you know that people share their daily moments or thoughts in a slideshow. But the thing with these stories is they will disappear themselves after 24 hours. If you notice clearly you will know that story ads will pop up in between two stories and they come with additional features such as visit a website, giving feedback, answering a poll, etc. Whenever you see this ad or perform an action Instagram will receive revenue. 

Video Ads 

The other format for advertisement is video ads. Whenever you’re scrolling through your feeds you will find video ads of different brands. With daily users of 500 million, you already understand why many brands are actually joining Instagram. Video ads are a method to reach their audience, which is proving quite successful. These Videos are around 120 seconds long square or landscape format and they come with a call to action button. 

Photo Ads 

Photo ads are not much different from the usual photos that are posted on the platform. The only difference is that they come with a call to action button and sponsored tags. With its growing popularity and engagement, this platform is attracting more advertisers. Advertising on Instagram is seamless and more people will help brands in building their business on Instagram.  


Carousel Ads

These Carousel ads are nothing new, there is just an extension to traditional photo ads. In photo ads, you can only view one photo. However, in Carousel Ads, you can see more videos or photos whenever you swipe right. Simply put, there will be multiple video or audio ads in a single ad. 

Collection Ads 

These ads are similar to carousel ads but a little different. The collection ads consist of a carousel display of images below a cover video or image of the products of a brand. 


The IGTV ads format is quite similar to that of Tiktok or Youtube. Basically IGTV is a vertical long video platform, it runs on the user-generated content. So this platform makes money through the ads and they share the revenue with the creators. 

Ads in Explore 

The explore page is where posts based on a user’s likes and interests appear. And these posts are from the accounts usually the user doesn’t follow. So the brands use the ads in exploration to target audiences that are open to finding new brands or for simply creating more awareness to people regarding their brand.


If you check out the explore page you will find out that shopping option right beside IGTV. As it has become a platform where people discover new brands, Instagram has taken it a step further by adding the shopping feature. This feature allows people to directly shop from Instagram. This is an excellent opportunity to reach more audiences and sell more products. With the integration of this feature, the brands can add their product catalog along with their profile. 


The brands can add the shop tab to their Instagram profile so that the visitors can check out all their products without leaving the app. You can tag and add your products to your post. Run an Instagram ad and promote the products in the insta stories. But wondering how Instagram gets money with this feature. Coming here!!!

Whenever a user buys a product directly from Instagram, the platform charges the seller a fee for that transaction. Not only that they make money through Instagram shopping ads. These ads are not that different from the traditional ads they come with a tagged product that can be brought on the platform or any other channels. 

Bottom line

You must have already understood how Instagram, one of the most popular social media platforms is making money. Check out the other business-model articles to find out how some of the biggest social media platforms or successful businesses make money.
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