By Spencer Feingold
Instagram’s new e-commerce feature could be a major source of revenue for Facebook, the platform’s parent company, according to analysts at Deutsche Bank.
“People are greatly influenced by the images they see, and then go out and shop,” said Lloyd Walmsley, a research analyst at Deutsche Bank. The new Checkout on Instagram feature makes it much easier for users “to see something they are interested in, hit a few tabs, and check out.”
The Checkout feature, which launched last month, allows users to purchase products from advertisers without leaving the Instagram app.
Deutsche Bank said in a letter to investors this week that the new feature could earn Facebook $10 billion in new revenue by 2021 ー $5 billion from direct e-commerce transactions and another $5 billion from increased advertising.
Targeted ads, Walmsley said, will be especially important for the new feature's success.
“As users follow more brands, as they start to engage with the shopping, Facebook will just get more and more data, and get better at showing the right thing to the right user," Walmsley said.
Instagram has partnered with more than 20 brands to sell products through the app, including Adidas, H&M, Nike, and Zara.
In recent years, Facebook has been working to diversify its revenue sources; an effort that included its purchase of Instagram, which Walmsely called a “home run of an acquisition.”
Checkout on Instagram is only available in the U.S., but the company said it will announce plans to expand the feature to more brands and more markets soon.