An Instagram shopping feature few people have heard of is poised to be Facebook's next $10 billion opportunity (FB)
- Instagram Checkout may be a $10 billion revenue generator by 2021.
- Deutsche Bank predicts that the Facebook-owned shopping feature is poised to be a smash hit.
- A survey conducted by the financial-services firm found widespread interest in using the feature.
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Instagram is gearing up for its next $10 billion opportunity — even if most people don't know it exists just yet.
The Facebook-owned photo-sharing app is in the early stages of testing Instagram Checkout, a new feature that lets users buy things directly though the app. Analysts think it could be a very, very big deal for the company.
In a research note published this week, Deutsche Bank analysts laid out exactly why they think it could be a huge money-making opportunity for the Silicon Valley tech company. The financial-services firm has previously estimated that shopping on Instagram could generate $10 billion a year in revenue by 2021 — and now, after a new survey of social-media users it conducted, it thinks it could be even more successful than it previously anticipated.
"Per our survey, we found that the purchase frequency and purchase AOV [Average Order Value, or the average price of purchases] are actually higher amongst Instagram shoppers than we originally anticipated," the analysts wrote.
"While it may take time to scale the product catalogue and transaction velocity on the platform, we think this can provide Facebook a powerful media- and long-term revenue and engagement opportunity," they added.
Deutsche Bank's analysis provides an enlightening window into how Facebook hopes to grow its revenues in the years ahead and the opportunities that will present themselves for the people and organizations that build businesses on its platform — and it serves as a reminder that, despite Facebook's track record of ugly scandals, it remains an incredibly capable and profitable business.
There are a few key data points in Deutsche Bank's social-media survey that point to Instagram Checkout's potential.
- For starters, "43% of survey respondents said they were either 'very likely' (18%) or 'somewhat likely' (25%) to purchase products on Instagram using the new checkout feature" — indicating a high level of general interest.
- And those that had used it already were even more enthusiastic: "83% said they were either 'very likely' (60%) or 'somewhat likely' (23%) to try again in next 6 months."
- A big point in favor of Instagram Checkout is its straightforwardness, with 42% pointing to "ease of use" as a reason they're most likely to use it in the next six months.
Right now, it's early days for the feature. A whopping 64% of respondents told Deutsche Bank they hadn't heard of Instagram Checkout. But broader attitudes indicate that users are more than willing to purchase things through Instagram if it's convenient — and, in the coming years, that could translate into billions of dollars of additional revenue for Facebook.
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