Instagram Catches Up to Snapchat

Instagram announced this week that it’s surpassed 150 million daily active users – the same number last announced by Snapchat.

Since Snapchat’s number was last announced in June, it’s daily active user number is probably a good bit higher by now. Additionally, the topline number of active users doesn’t speak to engagement and how much time users are spending on Stories in each app.

However, Instagram only launched its Stories platform in August. It seems likely that Instagram could truly catch up to Snapchat over the next year.

Instagram Stories Start to Monetize

Instagram’s other big announcement today was that it’s starting to introduce ads into Stories.

Ads for Instagram’s stories will work much like ads on Snapchat – they’ll appear after you watch a story and before you can view the next one. And like Snapchat’s ads, they are easily skippable with one click.

It remains to be seen how effective this ad format will be at scale, given how easy it is for users to skip an ad within seconds. Speaking from my own experience, I’ve never once watched a full ad on Snapchat despite being an active user.

However, Instagram has a big leg up on Snapchat in trying to monetize its Stories platform. As I’ve written previously, Snapchat has a big problem when it comes to scaling up both users and ad revenue: it lacks an algorithm.

Instagram’s Monetization Advantage

On Snapchat, Stories always appear in reverse chronological order, with the most recent story at the top. This type of curation works well when a content platform is small, but it doesn’t scale well as the network grows. This is exactly the problem that Twitter has had. It’s taken too long to get away from its reverse-chronological timeline and provide timely, personalized content. The result is that it’s still way too difficult to find quality content on Twitter, which is a big reason Twitter’s use growth has slowed to a trickle

Snapchat missed a big opportunity to overcome this challenge when it removed the Auto Advance feature for Stories. This feature worked the way Instagram’s stories do now. Once you finished watching one story, it would automatically play the next one in the queue.

Removing this feature ended Snapchat’s best chance at creating an algorithmically curated feed of content, like Facebook has with its News Feed. Instagram switched to an algorithmic feed of content last year, and its Stories feature is already organized based on how frequently you interact with each user’s content. Stories from users you never interact with are pushed to the back of the queue, unlike on Snapchat.

This continuous “feed” of stories is the perfect place for Instagram to insert video ads. On Snapchat, ads typically come at the end of a Story you just watched, rather than between a stream of stories. This likely kills engagement on Snapchat’s ads and will make it difficult for them to monetize.

Since Instagram is already far ahead on personalization and on having the right content feed in place to deliver ads, it will likely see a lot more success than Snapchat has in selling ads for its Stories platform.

Snapchat is planning to hit $1 billion in revenue this year, largely by scaling up ads in Stories. But as Instagram’s Stories platform catches up in users and rolls out ads, it may get there first.

Filed under: Platform Innovation | Topics: content platform, instagram, snapchat