Start-ups struggle with Instagram’s new business models
Over the past decade, Instagram has created a new kind of entrepreneur. Anyone can start a page and post pictures for free, giving founders access to over 1bn potential customers. And during the pandemic the platform has been essential to helping some small businesses survive.
“[Instagram] was my lifeline,” says Catherine Sharman, chief executive and founder of UK-based Après Food. She had to close her restaurant in lockdown, but kept the business afloat by pivoting to delivery of healthy ready meals, which she posted on Instagram.
Jamie Lester, who founded a consultancy that specialises in selling new homes, says that traditional sales methods, including online property portals, no longer attract the volume of buyers needed for reach and sales. For the latest project that he has helped to market, he turned to social media — mainly Facebook and Instagram. “About 70 per cent of buyers were from social media,” he says. “As a business, we need it.”
Overall, one in three UK companies chooses to build its business on Facebook or Instagram, because of the ease and growth potential, according to the Advertising Association’s 2019 Advertising Pays report.
And founders have witnessed peers become millionaires. Make-up artist Huda Kattan, for example, started a blog and gained millions of Instagram followers. In 2013 she started her own cosmetics line, and now has a net worth of $490m, according to Forbes.
In June, Adam Mosseri, head of Instagram, declared that it is “no longer a photo-sharing app”. As the company competes with other social media channels like YouTube and TikTok, Mosseri said it would prioritise helping creators “make a living”, as well as video, private messaging and ecommerce.
Just before Mosseri’s announcement, the app’s business tools had been updated to include a shopping tab for users, which includes a customisable storefront that lets viewers shop directly on business profiles, either through the app or by linking to a company website.
These are welcome developments, but the recently-updated advertising set-up on Instagram also means that large businesses can boost their visibility through paid advertising. Businesses promote existing posts for a small fee to reach a wider audience — a promoted post — or create a new post to use as an advert, known as a sponsored post. These give more reach, which in turn helps secure preferential treatment from the artificial intelligence powering the app’s algorithms.
Not all small businesses can afford this and the changes have had a tangible effect on sales traffic and engagement from Instagram, according to Ruth Prada and Sam Bokma, founders of Trippy Tuesday, a small business that makes candles and jewellery in shapes that are “body normative” and reflect how real people look. When they launched the business almost two years ago, Instagram accounted for more than 90 per cent of the traffic to their online store. They reached their audience by simply posting about their products and the story behind them.
You can’t grow a new business on Instagram now without ploughing a load of money into it
“At the start, we weren’t doing any paid marketing on Instagram because we were getting reposted by people with millions of followers. We were reached out to by Miley Cyrus who found the candles randomly,” says Bokma, noting that their launch collection sold out within 24 hours.
Now, however, Instagram accounts for just 70 per cent of their sales traffic, their posts have gone from receiving “thousands” of likes to only “hundreds” and followers have plateaued at about 19,000.
Jennifer Poust, social media and marketing manager for skincare brand Suneeta London, has noted similar declines driven by the algorithms. “The reach is terrible,” she says. “ . . . You can’t grow a new business on Instagram now without ploughing a load of money into it whereas you used to be able to grow organically.”
And Instagram’s focus on video is compounding the pressure. “You just don’t know if anyone is reading posts [any more], because there’s this huge emphasis on video,” says Poust.
There is also an issue with advertisements — and even whole accounts — being removed by mistake for violating Instagram’s guidelines, something that smaller businesses can ill-afford. For example, Trippy Tuesday set up an Instagram store for their products — which was rejected by the app’s censorship rules as their candles emulate a naked body.
Poust says Suneeta was “banned for three days” because she had taken part in a small business trend where pages promote and follow each other. “At that time we had no adverts running . . . [Instagram] sent us a message saying, ‘You’re not allowed to use third-party apps to gain followers’, assuming that because we weren’t paying them, it didn’t make sense that we were getting new followers.”
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Customer support to resolve the issue was also lacking, according to Poust. It was almost impossible to reach a person as communication between businesses and the platform is via “online forms”, she says.
Meanwhile brands with fewer than 10,000 followers are “penalised”, says Sharman of Après Food, because they cannot get full access to all of Instagram’s business features until they hit that milestone.
In response, Instagram says that “small businesses are the heartbeat of Facebook and Instagram.” The company adds that it has put business tools “into the hands of millions of entrepreneurs . . . around the world which were previously available only to the largest corporations”. It says there are more than 200m businesses globally using its services each month.
Many entrepreneurs still value Instagram highly as a platform, especially its informality and the fact they can market in a way that is not “pushy” and can remain close to their customers. They aren’t leaving any time soon. Instagram is “pivotal” and “fabulous”, it just needs to be fairer, says Sharman. Likewise the Trippy Tuesday founders enjoy posting artistic pictures instead of TikTok style videos. “Instagram can be its own thing . . . and it doesn’t need to change,” says Bokma.