EMarketer: Instagram's ad sales will jump 47% despite slower user growth

Brief:

Instagram's advertising revenue will jump 47% to $13.9 billion this year from 2019 despite slower user growth in the U.S. for the next few years, according to an estimate eMarketer shared with Mobile Marketer. The researcher cut its forecast for domestic user growth to 4.5% this year, to 112 million, from a prior estimate of 5.4%.
Instagram's double-digit ad growth comes from the expansion of ad inventory in other sections of the app, such as its Discover tab that helps to find other accounts to follow in the app, eMarketer said. The researcher also forecasts that shoppable ads, currently in beta testing, will be a key driver of sales growth.
TikTok, the social video app that's popular with U.S. teens, and a resurgent Snapchat will impede Instagram's growth among young adults, per the report. While Instagram's user base among people ages 25 to 34 increased more than 11% last year, faster than previously forecast, eMarketer expects that the platform won't maintain that growth rate.

Insight:

Instagram's slowing growth rate can be expected as the social media sector matures and gets more crowded, giving mobile marketers more ways to reach their target audiences. Instagram will still be a significant marketing platform, as eMarketer notes, as the Facebook-owned app expands its ad inventory and offers more e-commerce support to brands and retailers. E-commerce is a priority for Facebook as it faces growing competition from online marketplaces like Amazon that are rapidly expanding their ad sales.

EMarketer's lowered forecast for Instagram extends several years, reflecting greater competition from rivals like TikTok and Snapchat. EMarketer also cut its 2021 growth forecast to 3.2% from 4.1%, marking a continued slowdown from 6.7% in 2019 and 10% in 2018. The researcher said older demographic groups aren't signing up for Instagram as quickly as anticipated in prior forecasts. Meanwhile, TikTok has 26.5 million monthly active users in the U.S., roughly 60% of whom are between 16 and 24 years old, per Reuters, and Snapchat boosted ad revenue by 50% in Q3 after adding users and expanding its software tools for advertisers.

EMarketer's forecast for Instagram ad sales supports other research indicating that advertisers have increased their spending on the platform. Ad spend on Instagram Stories, a popular feature that lets users post collections of images and videos that disappear after 34 hours, jumped 70% in Q3 from a year earlier, according to social media marketing firm Socialbakers. Instagram Stories made up about 10% of total ad spend on Facebook apps during the period, making the format ripe for continued growth.