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Get ready for more ads on Instagram

MarketWatch logo MarketWatch 10/4/2022 Emily Bary
© AP

Prepare for more advertisements on Instagram as parent company Meta Platforms Inc. tests out new formats amid troubling times for the online-advertising industry.

Meta is introducing three new advertising types for Instagram, the company announced Tuesday, along with two new advertising types on the Facebook platform that are focused on the Reels format.

The new Explore ads will appear as a block in the Explore section of Instagram. New “profile feed” ads mean that users may see ads while browsing through another person’s profile.

As it stands, Instagram users can visit someone’s profile, click on a post by that person, and scroll down to see full-size versions of all of that person’s posts. With the new ad format, people might see ads in between that user-generated content.

When asked how the new ad formats would impact ad load, a Meta spokesperson said that the number of ads people see depends on their Instagram usage and that the company monitors user sentiment.

The new ad types arrive in the wake of a downturn in online advertising that led to Meta’s first year-over-year decline in revenue as Facebook’s parent company deals with increased advertiser caution in light of the current economy as well as competitive threats from TikTok.

Meta specifically faces some growing pains amid the rise of Reels. While Meta has emphasized this content format to contend with competitive challenges from TikTok, Meta executives cautioned on their last earnings call that Reels carry a lower monetization rate than more established content types, though they were upbeat that they would ultimately see financial payoff.

“Now in theory, we could mitigate the short-term headwind by pushing less hard on growing Reels, but that would be worse for our products and business longer term since we’re confident that Reels will grow engagement overall… and will eventually monetize,” Chief Executive Mark Zuckerberg said on that call.

Nada Stirratt, Meta’s vice president for its global business group in the Americas, told reporters at a Monday media event that the feed ads give creators opportunities to generate revenue from their profiles. The company added in a release that it would “experiment with a monetization opportunity that will allow eligible creators to earn extra income from ads displayed in their profile feeds, beginning with select U.S. creators.”

Representatives from Meta said that the company isn’t disclosing the portion of revenue that creators will get from profile-feed ads but that the company expects earnings from them “will be supplemental and not a significant source of income.”

Ads in profile feeds will be targeted to users similarly to how they are elsewhere on Instagram, and creators won’t have to take special action to determine which sorts of ads will be shown to viewers of their profiles.

Social-media companies are under pressure to secure and retain strong creators on their platforms as rivals introduce various incentives for those who provide user-generated content. Stirratt said at Meta’s press event that the ad changes highlight the “importance of creators.”

A Meta spokesperson added that the new Reels ad updates will carry a 45/55 revenue-share agreement, with 55% of that revenue going to creators.

Instagram is also testing “multiadvertiser” ads. Now, when users engage with an advertisement, they might see ads underneath on related subjects. Meta said in a press release that the additional ad content will be determined using machine learning.

For Reels on Facebook, Meta is trying out two new formats. “Post-loop” ads will display as “skippable and standalone” video ads that play for four to 10 seconds at the end of a Reel, before that original Reel begins again. A test of image-carousel ads on Facebook Reels will show two to 10 images ads at the bottom of Reels content on the platform.

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