Instagram has attracted more than 200,000 advertisers, company says

A screen displays the Instagram logo during a presentation by co-founder Kevin Systrom as he announces the launch of a new direct image messaging service named Instagram Direct in New York in this file photo dated December 12, 2013. REUTERS/Lucas Jackson

NEW YORK (Reuters) - Five months ago, Facebook Inc FB.O began trying to transform its picture-sharing app, Instagram, into a money-making business. Since then, Instagram has attracted more than 200,000 advertisers, the company announced Wednesday, a clear sign of its potential for significantly contributing to Facebook’s revenue.

Instagram opened its platform to a couple of hundred advertisers in June, the company said, and by September had opened the app to anyone wanting to purchase an ad. Three-quarters of its advertisers are now outside of the United States, the company said.

Instagram has also rapidly grown its user base, surpassing 400 million users last year. By comparison, Twitter TWTR.N, which began selling advertisements more than five years ago, has 130,000 advertisers and 320 million users.

Instagram has had distinct advantages: It uses Facebook’s ad technology, which is among the most advanced and allows advertisers to target highly specific demographic groups, such as 18-25 year old males who live in New York. And advertisers have the option to run campaigns across both Facebook and Instagram.

“The Facebook relationship has helped us grow our user base” and attract advertisers, said James Quarles, Instagram’s head of global advertising. “People can be creative in using the two together and run things across both platforms. That really hasn’t existed much in the marketing world.”

Instagram would not disclose how many of its advertisers also use Facebook, but during an earnings call last month, Facebook Chief Operating Officer Sheryl Sandberg said 98 of Facebook’s top 100 advertisers also ran ads on Instagram.

Because of its visual nature, Instagram appeals especially to small businesses and consumer goods advertisers, said Neil Waller, co-founder of Shore Projects, a UK-based watch company. His company, he said, asks people to post pictures with their watches on Instagram, which the company then uses to advertise on the platform and post on its own Instagram page.

While Instagram used to sell cheaper ads than Facebook, ads on the two sites are priced nearly equally now, said Waller, as Instagram has incorporated more of Facebook’s ad technology.

Instagram declined to disclose its revenue, but research firm eMarketer predicts it will generate nearly $1.5 billion in revenue this year.

Editing by Sue Horton and Andrew Hay