Instagram creates new revenue stream with Checkout
Instagram, Facebook’s photo sharing platform, is enabling consumers to tap and buy products right from the app. Checkout, the new shopping feature, circumvents traditional merchants and allows manufacturers of popular brands to sell direct through the Instagram feed without the user even having to leave the Instagram. Consumers enter their payment card details and billing address on their first purchase and the details are saved for the next transaction.
Checkout creates a new revenue stream for Instagram’s parent company Facebook, as Checkout includes a selling fee for the brands that use it. Instagram will not change the price of the items for consumers. Only organic posts from the partner merchants will feature Checkout buttons, and ads aren’t eligible. Instagram is betting that streamlining the purchasing process will also result in higher purchases of Instagram ads and encourage brands to advertise more on Instagram
Facebook’s move is both defense and offense at the same time. Amazon has been pressuring both Facebook and Google as major new advertising platform. Until this product, Facebook had no way to fight back because it did not sell goods directly like Amazon. Now it does – and Checkout enables brands to sell directly to consumers for a fee. While Amazon has cornered online utility shopping, Instagram is aiming to be the go-to app for discovery shopping. Brands are the principal source of advertising revenue on Google, Amazon and Facebook.