Digital Content Platform Ad Revenue: Who Should Make – and Keep – the Money?

Bloomberg has reported that Instagram generated $20 billion in advertising revenue in 2019, more than a quarter of Facebook’s overall revenue for the year. The impressive number, which was leaked anonymously because the information is not public through Facebook Inc. at this time, signals how powerful Instagram has become as a digital content platform since Facebook acquired it in 2012 (Bloomberg notes that the photo-sharing app had no ad revenue model before the acquisition). Instagram’s ads are primarily native ads: they are in-feed and story-based ads that look and feel exactly like Instagram users’ content. This strategy differs in some ways from other content-based ad vehicles, like YouTube, which features more traditional, TV industry-esque commercials before and during content (some skippable, some not). But the biggest difference between Instagram and YouTube’s advertising strategies? YouTube shares ad revenue with content creators that host their ads. Instagram separates out its ads from its users’ content – and so they don’t share the revenue with anyone.

According to the same Bloomberg article, YouTube “…shares more than half its advertising revenue with video creators,” a strategy that likely contributed to widespread disappointment in response to their reported $15 billion in ad sales for 2019, a gross figure that does not account for the distribution of revenue to content creators.

As digital marketing strategies and tactics rely more and more on user-generated trends and content creators, the question arises: Who should make, and keep, the money from ads placed on digital content platforms? YouTube is now looking towards a new e-commerce model, featuring, for example, “…a swipe-able carousel of 40 ads with photos, prices and ‘Shop Now’ buttons,” (Source) a departure from their typical in-video ads. So it seems the way of content-based digital advertising revenue models may follow Facebook and Instagram, rather than YouTube. But it’ll be interesting to see how that impacts content creation on these platforms moving forward, and therefore the viability of growing audiences and ad revenues there: if content creators can’t get a piece of the pie, will they continue to come back and post? Given Facebook and Instagram’s popularity, evidence suggests they will – but what about the fate of first-mover platforms like YouTube that have always shared revenue? It seems like we could be approaching a turning point for revenue sharing as video content continues to be pervasive as a marketing trend, and companies are seeking growth in digital ad revenue more aggressively than ever.