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TheStreet Open House

Instagram Just Took Another Step Toward Making Money

Stocks in this article: FB

NEW YORK ( TheStreet) -- Facebook's (FB - Get Report) huge acquisition of Instagram was called into question when it happened last year. An announcement today by the photo sharing social network could be the first sign that the move is about to pay off.

Instagram is introducing Photos of You, something that makes it a lot easier to add other people and things to your photos. You can add or tag these items when uploading pictures. The service is potentially a huge benefit for marketers and advertisers.

The new Photos of You feature is available immediately on Apple's (FB - Get Report) iOS operating system, and Google's (GOOG) Android. On May 16, the feature will become visible on users' profiles, but they can experience the new features and get comfortable with it starting immediately.

Facebook already offers tagging on its photos, so this feature coming to Instagram isn't surprising. What is potentially beneficial is brands getting free pictures of their products. Many people take pictures of their coffee, food or drinks, and free advertising would be alluring to companies such as Starbucks (SBUX), Chipotle Mexican Grill (CMG) or Coca-Cola (KO). Of course it's all dependent on the user tagging the brand and location, but given people's propensity to over-share information these days, making that assumption isn't a far stretch.


On Facebook's earnings call last night, CEO Mark Zuckerberg touched on the potential Instagram has in its future. He noted that Instagram now has over 100 million people in its community, up from 22 million when Facebook purchased the company for nearly $800 million (Facebook's offer was in cash and stock) and is growing faster than Facebook did at this size.

"You already have a lot of brands and folks who advertise with Facebook putting content in Instagram, getting huge engagement rates," Zuckerberg said on the call. "So people are coming to us and asking for ways to make that even richer and it's something that we're thinking about. But right now I think that -- I'm just really proud of the team and excited about how quickly they're growing."

The acquisition price Facebook paid for a company with just 13 employees at the time made everyone stand up and pay attention. If Photos for You is the first step in delivering a return on that massive investment to shareholders, the money Facebook paid out could be be peanuts, compared to what it brings back in.

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