Brief:

• Instagram plans to sell ads in IGTV, the video hub that can be used with the photo-sharing platform or as a standalone app. Instagram last week started asking video creators to partner on tests of ad inserts, Bloomberg reported, citing people familiar with the matter.
• The plans to sell ads follow the development of a prototype for an Instagram Partner Program to give creators a way to earn money by showing ads with their videos, TechCrunch reported last month. The idea is to help creators monetize their works and develop more high-quality content for the platform.
• Instagram currently sells ad placements in its main news feed and in Stories, the feature that lets users string together several images and videos into a single post the disappears after 24 hours.

Insight:

Instagram's reported plans to test ad inserts on IGTV would help to start a virtuous cycle of letting creators monetize their content, giving them greater incentives to improve the quality of their work and drive higher viewership. Instagram doesn't share ad revenue with creators, although influencers are free to make money from paid endorsements in their posts. 

By selling ads on IGTV, Facebook aims to take on Google's YouTube, the market leader for user-generated videos, and startups like TikTok that are solely focused on viral videos. YouTube's advertising sales jumped 36% to $15.1 billion last year, making the platform a key revenue driver for parent company Alphabet. It's not clear how much ad revenue TikTok has generated, but the platform's parent company ByteDance is rapidly expanding its workforce to keep up the torrid pace of its user growth in the past two years. TikTok this year will boost its U.S. user base by 22% to 45.4 million, eMarketer forecast last month.

Facebook's plans to start selling video ads on IGTV come as the social network has grown more reliant on Instagram, which generated $20 billion in revenue last year, according to a separate Bloomberg report. Not only has Instagram offered a broader variety of ad formats in the past few years, but the photo-sharing app also is working to expand into ecommerce. Instagram in 2018 introduced a dedicated shopping channel in its Explore tab and Stories. Later, it created a collection tab to let users save products they've tagged in the app for a later purchase. After debuting Checkout on Instagram last year, the app launched an @Shop account that users can follow to browse and buy from emerging and popular brands across a number of categories.

While parent company Facebook hasn't disclosed usage information for IGTV, recent press reports suggest the platform has only been downloaded 7 million times, despite the broad popularity of Instagram. The photo-sharing app, which has more than 1 billion users worldwide, in January removed the IGTV button from its home page — the clearest sign that IGTV hasn't been a significant driver of usage.