Instagram makes lots of money. Now creators want some of the profits. - Marketplace APM

In recent days, we’ve started to find out how much money YouTube and Instagram are making. In its recent earnings report, parent company Alphabet said YouTube made just over $15 billion in advertising sales in 2019.

A few days later, Sarah Frier, a reporter at Bloomberg, broke the news that Instagram brought in $20 billion last year in ad sales, more than a quarter of Facebook’s total revenue. But while YouTube shares its ad revenue with the creators on its platform, Instagram doesn’t, even though both rely on a steady stream of uploads from their users.

Are creators going to ask Instagram for a cut? I spoke with Frier, and she said they might. The following is an edited transcript of our conversation.

Sarah Frier: I got a lot of messages yesterday from Instagram creators that I interviewed who said that this seems really unfair to them. They didn’t expect Instagram made this much in revenue, but now that they know, they really want a piece of it because they feel like they are creating the value for the platform that gets Instagram users to keep coming back.

Molly Wood: Do we have any idea how important creators are, creators and their audience?

Frier: It really depends on who the user is, because some people use Instagram just to be updated on their smaller circle of friends. They use it as a Facebook alternative. But there’s a whole other host of people who use Instagram specifically to follow creators who are influencers, whether it’s in travel, or in cocktail making, or in embroidery. The way people currently make money if they have a following on Instagram is through these unofficial relationships. They can say, “I’m a travel influencer, I’m going to Bali. These hotels will give me free stay. All these people will come together in an unofficial relationship to pay me for this experience that I can gain following from.”

Wood: But is there really any upside for Instagram to create those direct relationships? Certainly YouTube has come under fire for incubating controversial creators, for example. Could it just be cleaner for Instagram to say, “Thanks, make your own money on your own”?

Frier: I think it’s definitely something that they are concerned about. Instagram, in its initial conversations with people to allow them to be paid to create content for Instagram TV, had a clause in the contract that said that they weren’t allowed to talk about anything controversial — no politics, no race stuff, nothing that would maybe be something that Instagram didn’t want to put its money behind. They are a lot more cautious about that brand value. And since Instagram has this reputation of being an aspirational place, what is happening with their brand maintenance is they’re trying to make sure that if they get into these close relationships with creators, that they don’t do it in a sloppy way.