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Facebook’s Instagram to Add Advertising: SF Mover

Oct. 4 (Bloomberg) -- Facebook Inc., operator of the world’s most popular social network, rose in trading today after it said it would sell advertising on its Instagram photo service, the first effort to make money from the acquisition.

Shares rose 3.8 percent to close at $51.04 in New York, near their all-time high. Instagram promotions will start to appear on the mobile application, which lets users share images from smartphones, in the next couple of months in the U.S., Facebook said in a blog post yesterday.

Facebook is seeking new ways to drive revenue from mobile devices as users increasingly access digital services from wireless devices. Mobile made up 41 percent of ad revenue in the second quarter, up from 30 percent in the previous period.

“There just continues to be momentum, continues to be good news,” said Benjamin Schachter, an analyst at Macquarie Securities USA Inc. “Even though the Instagram news was somewhat expected over time -- we’ve been waiting for the announcement this year, and yeah, it’s going to be a positive.”

Instagram will deliver a “small number” of pictures and videos from a handful of companies that users aren’t necessarily following, the company said.

“Our aim is to make any advertisements you see feel as natural to Instagram as the photos and videos many of you already enjoy from your favorite brands,” Instagram said on the blog. “After all, our team doesn’t just build Instagram, we use it each and every day. We want these ads to be enjoyable and creative in much the same way you see engaging, high-quality ads when you flip through your favorite magazine.”

Users will be able to hide promotions they don’t like, the app developer said. They can also give feedback about what doesn’t “feel right” about the ads. Instagram, which Facebook bought for more than $700 million last year, has more than 150 million users, up from more than 130 million in June.

Facebook, based in Menlo Park, California, has continued to update the service. Instagram unveiled tools in July that lets members embed photos and videos on outside websites, including blogs and news providers. Videos were added to the photo-sharing app in June.

To contact the reporter on this story: Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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