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Is Instagram Getting Greedy?

Yesterday, I marveled at Instagram’s age-defying growth.

Today comes word that the network has surpassed 200,000 advertisers. 

For the Facebook unit, it’s a point of pride. But I wonder whether Instagram’s aggressive monetization strategy poses the greatest risk to its popularity.

Ad-free until fairly recently, the network is increasingly crowded with the stuff. And it's not about subtle spots. Earlier this month, in fact, Instagram began letting brands run ads up to 60 seconds in length.

The network is also testing new ad formats that achieve difference objectives, from Web site clicks to mobile app installs.

Instagram credits the ad surge to a decision to offer its API to outside parties, in August. With the change, brands and their developer teams were invited to plug their software directly into Instagram’s API. Among other efficiencies, this allowed brands to more easily plan, buy and execute their campaigns on the popular social network.

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Since then, ad growth has come as a shock to many in the industry.

“The pace and scale of investment from our clients [in Instagram advertising] exceeded our expectations dramatically,” Jamie Tedford, founder and CEO of Brand Networks, noted in a recent report.

Brand Networks saw ad impressions on Instagram rise more than thirteenfold. from 50 million in August to 670 million in December, while the ad network expects to be delivering more than 1 billion monthly Instagram ad impressions by the end of the first quarter.

But how much is too much?

Suggesting a saturation point, brands are seeing the cost of ads on Instagram rise. Across sectors, Brand Networks recorded a fluctuation in CPM pricing from $5.21 in September to a peak of $7.20 in November -- peak shopping season -- before declining to $5.94 in December. 

At what point do ads begin degrading the user experience? Instagram seems determined to find out.

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