New charts show how Stories are critical to Instagram's growth, but advertisers are slow to shift dollars to vertical video
Instagram is under pressure to grow beyond its newsfeed by selling ads in Stories and the Explore tab. However, a new Cowen report found that 72% of advertisers' dollars are still going into newsfeed ads. Explore tab ads are also off to a slow start, although 24% of advertisers plan to test it in 2020, up from 6% in 2019. Click here for more BI Prime stories.
Stories is becoming a bigger source of revenue for Facebook-owned Instagram, but advertisers are slow to adopt the format, a new report from financial services firm Cowen found. Stories is expected to represent 26% of Instagram's ad revenue this year, or $5.3 billion, and rise to $25.6 billion, or 37% of its ad revenue, by 2025, Cowen says. But while more advertisers are experimenting with Stories, advertisers are still spending the bulk of their Instagram ad dollars on newsfeed ads, the survey found. Facebook is looking to Instagram to grow as its own ad business slows, and Instagram is trying to push advertisers to ads in Stories and Explore, its photo and video recommendation section, as its newsfeed gets saturated with ads. For the report, Cowen surveyed 50 US advertisers that collectively spent $12.5 billion on advertising in 2019. Advertisers struggle to buy non-newsfeed ads Cowen's measures two numbers: A straight average and a weighted-average number that takes the advertiser's spending volume into consideration. Advertisers are experimenting with Stories ads, with 64% of advertisers buying them in 2019.
But on average, 72% of Instagram budgets will go to newsfeeds ads this year, the survey shows. In general, buyers said they like Instagram for its targeting and low prices, particularly for direct-to-consumer brands. A consumer product advertiser called Instagram the "only place where direct-to-consumer brands can shine." When it comes to Stories, though, advertisers have reported challenges with vertical-oriented creative and performance.
Ad buyers still favor Instagram Stories over Snapchat Stories, though, according to the survey. In addition to Stories, Instagram is looking to sell sell more ads in Explore, but Explore hasn't become a significant source of advertising, per Cowen. 24% said they expected to test Explore ads in 2020, up from 6% in 2019. SEE ALSO: 7 charts show why Amazon's ad business could balloon to $17 billion this year and is a growing threat to Google Join the conversation about this story » NOW WATCH: A 45-year-long study discovered trends in successful hyper-intelligent children
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