PEST Analysis of Instagram: How it’s now worth 100 times the initial investment

Did you know Facebook bought Instagram for a tenth of the price it’s worth now? At the time, people thought Mark Zuckerberg was nuts to buy a platform that had zero revenue. And now it’s worth billions. How Instagram grew to be so profitable in such a short time is answered in this PEST analysis of Instagram, along with the political, social, and technological factors influencing its success, according to the PEST framework.

Political factors: A place for politicians to be relevant

Instagram has become a platform for political parties. The public openly shares their political views on Instagram and connects with like-minded people thanks to the use of relevant hashtags. And political leaders (current and hopefuls) are using Instagram for outreach. Why? Because it’s more popular than Twitter — and even Facebook — for political opinions, debates, and sharing.

If a politician wants an “in” with the younger crowd, Instagram is the right choice. Teens and young adults are more active on Instagram these days — including minorities. In 2016, 34 percent of Instagram users were Latinos, and 38 percent were African American. In contrast, only 21 percent of users were white. These percentages confirm that this is the perfect platform to reach specific audiences.

It’s not just posting; politicians are live-streaming too. Small talks, cooking food, even fun “pranks” — politicians are trying their best to seem hip, cool, and ‘real’ for the prized “youth” vote. And not just in America — this is becoming common in countries overseas, like India.

This isn’t too surprising. Not only does Instagram have millions of daily users, but it’s also owned by Facebook CEO, Mark Zuckerberg. He came under fire for allowing “fake news” and Russian tampering on his platform. To think similar problems could leak into Instagram isn’t too far of a stretch. Instead of fearing this progression, politicians are jumping on it.

Social media is less a product that relies on following the rules of politics. Instead, it’s a game changer for politics. It allows for users to have 24-hour access to political news, poll results, rumours, and scandals. It enables direct interaction with politicians. And, as we’ve seen with Facebook, it’s open to bias by the creators of the platform; Instagram is no exception.

Economic factors: Instagram is now worth 100 times the initial investment

In 2012, Instagram didn’t have any revenue. This is why, when Facebook decided to buy Instagram for $1 billion, the public was skeptical. Yet, only two years later, analysts concluded that Instagram was worth $35 billion. As of last year, it’s at $100 billion in worth — now 100 times more than what Facebook paid for.

How did this happen? Honestly, it’s not fully known. The platform does offer a variety of methods to create money though. Firstly, many companies purchase Instagram ads. Paid ads were introduced in 2013, a year after Facebook bought it. Now, it’s one of the more popular ads bought by businesses, more so than Facebook Ads. In fact, advertiser spending increased by 177 percent in 2018; in comparison, Facebook advertiser spending only increased by 40 percent.

The Instagram platform is one of the most popular social media available. A part of that luster comes from sponsorship deals. Influencers who have massive followings (tens of thousands to millions) are paid by companies to post about a product. Although this doesn’t reach Instagram’s pockets, it does boost user demographics and popularity. And it’s another means (besides ads/sponsored content) that businesses can take advantage of.

Social factors: A place for the young and hip to do… everything

As of 2018, Instagram has 1 billion monthly active users. This is an increase of 200 million the previous year. The majority of these users are young (teens to late 20s) with a vast majority being racial minorities.

It seems Instagram is where the “young” people go, while Facebook is where the “older” gang hangs out. On Instagram, people upload photos onto their profile to showcase their lives, businesses, and hobbies.

They find other individuals using hashtags and the search function. And then, when they’re convinced, they can follow the people they like. Not only is Instagram for personal use, but it’s also home to many “fandom” or “niche” accounts — everything from fitness models to crochet animals. If you have a hobby or interest, someone on Instagram has an account dedicated to it.

People also communicate through direct messages (DMs). This isn’t just for personal conversations; people showcasing products will also converse with customers there as well. Instagram is just as much a platform for fun as it is for business.

In fact, more businesses are migrating or opening up accounts within the last few years because of substantial user growth. Unless you’re targeting the elderly, your demographic is likely an active user on Instagram.

Technological factors: The reigning social media platform for mobile users

And we arrive at the final stage when doing a PEST analysis. Instagram has a massive mobile user base — it’s unlike any other social media platform. This isn’t surprising though, as the platform was designed for mobile users. When first conceived, you’d take a picture on your phone then upload directly to Instagram — boom! You’re done.

This has, however, made it more difficult for businesses. Most have a social media guy who uses scheduling software for their posts and updates. Facebook and Twitter allow for easy post scheduling through a variety of popular tools, like Buffer and Hootsuite. Instagram has only recently allowed this. And even now, only business accounts allow for direct scheduling of posts. This is a huge upgrade considering, at one time, you could only schedule a notification, telling you when to post, rather than doing being able to automatically through the program.

And as a product of technology, Instagram is susceptible to data breaches and hacking. The platform offers several “help” articles regarding security, hacking, and visibility control. In many instances, it’s up to the user to keep their account safe — set up two-factor authentication, use a unique password, and avoid unsecured networks before logging in.

PEST analysis of Instagram: Conclusion

It’s clear after this PEST analysis of Instagram (more examples of PEST analysis here) that no one expected Instagram to blow up like it did. Well, except Zuckerberg when he bought it in 2012. It started as a simple photo-sharing app for mobile users. No revenue whatsoever. And now it’s worth $100 billion, with a billion of users, and is the go-to place for politicians looking to be recognized. Most people have an Instagram, whether it’s to show off their life, business, or hobbies. And the platform shows no signs of slowing down any time soon.

Recommended read: SWOT analysis of Instagram

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