YOU STILL READ MAGAZINES??
Hey <<First Name>>,
This week LVMH (Moët Hennessy – Louis Vuitton), Kering and a host of other companies finally announced that they will be channeling most of their ad dollars from print media to Instagram (here).
The change represents one of the most monumental shifts and the end of an industry that long relied on a simple formula - monthly publications littered with well-priced ads. Attempts by magazine and newspaper publishers to build their digital ad revenues are being strangled by a man taking more than 60% of all new ad dollars, Mr. Mark Zuckerberg, who’s finally flexing the cash machine he envisioned when he purchased Instagram seven years ago.
For decades, magazines were the source of most of our discovery. The print media industry had a monopoly on readers and leveraged this reach, by charging rich ad fees to a large swath of companies that relied on magazines to reach their existing and new consumer base. With colossal advertising budgets and an arsenal of widely appealing products, large brands took advantage of mass media to keep the small companies who couldn’t afford ads out. Magazines became prominent real estate for brands, they had no competition from other mediums, and they were able to consistently increase their fees to generate more and more profits over time. Lacking was any new technology, the foresight to aggregate information, or the ability to enable users to transact when making a discovery in a publication. As people now consume more media than ever, legacy magazine publishers are simply not innovating at the pace that shifting media habits demand.
While this was happening, Instagram was busy acquiring more than 1 billion users worldwide and has established itself as the digital interface by which we all communicate with one another. They have democratized the entire advertising landscape by giving brands a more efficient way to reach a larger audience. Without the entry barriers of magazine advertising, Instagram provided small, unknown businesses an opportunity to find an audience.
Zuckerberg is clearly determined to establish Instagram as the intersection of media and commerce. Under the guidance of Instagram founder Kevin Systrom, creating a product interface that was easy to use and share was clearly the focus. The explosion of direct-to-consumer companies unearthed an entirely new platform that enhanced the ability to sell ads.
Now it’s time to close the loop. Instagram has lifted the curtain on an idea that the company has been refining for years. In September a dedicated shopping channel was introduced in its Explore tab and was added to its popular Instagram Stories feature. In November Instagram added a collection tab to let users save products tagged in Stories and posts and introduced shoppable videos and a shop tab on business pages to showcase all the products from a single brand or merchandiser. In March they rolled out a native checkout feature with 23 U.S. brands that let shoppers pay for products without ever leaving the app, clearly evolving Instagram to inevitably operate as the primary destination for all commerce.
In a sign of things to come, Adidas CEO Kasper Rørsted stated that the brand's 40% jump in online sales in Q1 2019 from a year earlier can be largely attributed to Instagram's direct-selling features.
While everyone is focused on controlling the power and influence Zuckerberg wields with Facebook, he’s strategically moved his other chess piece to continue the attack.
God bless us all as we continue to feed the beast!