Instagram Usage Growth Dips in 2019, The SMB Angle

Data Scout is LSA’s series that curates and draws meaning from third-party data. Running semi-weekly, it adds an analytical layer to the industry data that we encounter in daily knowledge building. For LSA original data, see the separate Modern Commerce Monitor™️ series.

The numbers are in for Instagram’s U.S. user growth in 2019, meaning implications for anyone using it as a marketing channel. As we’ve examined recently, this includes SMBs who are increasingly using it to establish a presence on social media. That builds on the Stories format, which is fitting to some SMBs.

But first, what do the numbers say? According to eMarketer, Instagram U.S. user growth decelerated from 10.1 percent in 2018 to 6.7 percent in 2019. Before unpacking the figures, a quick reminder that unit growth, if linear, is supposed to decrease on a percentage basis as it builds from a larger base.

Conversely, non-analyst press — or anyone who hasn’t spent time with market sizing and forecasting — will often paint any growth deceleration as alarming (or “sharply” according to Ad Exchanger). With that rant aside, the remaining question is what Instagram’s growth-rate decline means.

Life Events

Given the stage in Instagram’s lifecycle and its volume users (one billion globally), this deceleration in user growth is mostly expected. But Ad Exchanger rightly points out that the dip could be due to Instagram’s slow adoption of both older consumers and Gen Z, where Snapchat and TikTok are stronger.

This raises a bit of a double-edged sword. Though Instagram isn’t growing rapidly among users under 25 and over 35, it’s seeing healthy performance in the sweet spot between. The 25-35 age bracket grew 11.4 percent during 2019. That compares with the overall growth rate of, again, 6.7 percent.

This demo-segmented growth is important where it matters: monetization. The buying-empowered and life-event rich 25-35 age group is valuable to advertisers. That especially goes for Instagram’s core advertiser categories like fashion, where it’s conditioning product discovery and “shoppable” ad formats.

In fact, despite the dip in user growth, eMarketer pegs revenues in 2019 at $9.5 billion, a 53 percent YoY boost. It expects revenues to grow to $13.9 billion (46 percent growth) in 2020 and $18.2 billion (31 percent growth) in 2021. Remember, those growth rates will naturally go down as the base increases.

Vanity Factor

Back to the question of Instagram for SMBs, this demographic segmentation could align. Life-events have typically been a target for local media and advertising. We’re talking wedding photographers, real estate agents and auto-dealers. So channels with strong engagement in these age brackets are primed.

As we examined recently, Facebook has attracted 90 million SMBs to build Pages. This is mostly driven by SMB familiarity with Facebook, as well as its ease of onboarding. The question is if it can deepen its SMB relationships by bundling or incentivizing Instagram presence and paid advertising.

This possibility again comes down to Instagram’s fastest-growing format: Stories (see figures above).  Relatively-low production barriers for Stories represents a possible path to gaining TV ad-like exposure. This taps into SMB vanity and could build on the targeting tools they may already know from Facebook.

We’ll keep watching closely as this unfolds, and as it reveals signals for SMBs and those that work with them on marketing strategies. Meanwhile, back to where we started, Instagram user growth will be an influential factor. eMarketer projects it will grow 4.5 percent in 2020 and 3.2 percent in 2020.

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