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Who’s viewing your Instagram, and profiting from it?

Matt Creegan, Special to CNBC.com
Wednesday, 25 Sep 2013 | 9:58 AM ET
David Paul Morris | Bloomberg | Getty Images

Ever since Facebook acquired Instagram, there has been speculation about how the image-sharing site intends to generate revenue. Instagram COO Emily White told The Wall Street Journal earlier this month that users can expect to see advertisements popping up on their feeds within the next year.

So Instagram is no longer to be ad-free. Pinterest also announced last week that it will soon begin testing out a new ad strategy. This can mean only one thing: Where advertisers go, data analytics firms will follow, especially where there is an endless stream of data from the masses to attempt to monetize.

Posting has become a gigantic lab experiment for Madison Avenue and the social media companies eager to prove their relevance to big corporations, specifically, in terms of return on investment for ad dollars, and sentiment analysis and engagement are quickly becoming cottage industries for Twitter and Facebook content.

Instagram's incorporation of advertisements is intended to entice brands to spend money sponsoring content, using the app's 150 million habitual users as bait. So it's no surprise that at least one social media data analysis company has already entered the nonexistent—at least before this week—realm of Instagram engagement analysis: Crowdbabble.

The Toronto-based start-up just launched its Instagram Analytics solution to provide brands with insights on user activity, which it claims is the first of its kind. Since Crowdbabble's launch in June, it's been limited to Facebook analytics, and it's just getting off the ground—the company's accounts range from freelancers to Samsung's Middle East division's Facebook page, totaling about 400 clients in all.

(Read more: Lady Gaga, big data pioneer?)

But Crowdbabble CEO Abbas Alidina sees the expansion to Instagram as a strategic move to capitalize on a surge in spending on Instagram analytics when advertisements begin appearing.

"People have been requesting it actually," Alidina said. "We feel as though there will be a lot of brands investing a lot of money in this area."

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Neil Mammele, an account manager at DrinkCaffeine, an ad agency that specializes in social media, said that the integration of advertisements shouldn't change the Instagram experience for users, always a primary concern, and delicate walk, for social media firms—and those looking to profit on their data.

"If Instagram can integrate their ads instead of having banners pop up left and right, users should not feel that their experience is being compromised," Mammele said. This concern has been transparent from social media companies as they try to justify their valuations—Pinterest's CEO went to lengths last week to explain its ad strategy to users.

Whether it translates into an effective advertising market is another matter. "Engagement is really the top metric in most ads," Mammele said.

The content of Facebook and Twitter allow analytics teams to analyze characters to measure the resonance of a particular product or campaign. Instagram, though, is image-centric, with few to no words explicitly expressed other than a short description or various hashtags.

For Instagram analytics, a picture doesn't have to be worth a thousand words, just equal to the worth of 140 characters. Marketers will have to adjust the way that they gather information from Twitter or Facebook activity—such as likes, retweets and language analysis—to analyze the effectiveness of an image.

(Read more: Can Twitter data explain Sharknado TV appeal?)

"The next step is connecting engagement to the bottom line," Alidina said.

Alidina says that many companies have developed their own metrics for social media, but Crowdbabble is banking on the fact that much in-house data analysis of social media won't be able to dig down as deep as specialist analytics firms can, especially as sites like Instagram and Pinterest become data-mining sites for marketers.

Another social media analytics firm, Topsy, recently released an index of every tweet every sent—by Justin Bieber and everyone else in the world—425 billion tweets and counting, which it plans to monetize.

Social media measurement can be overwhelming, and half the challenge is simply keeping up with the content that is being changed by the millions of living, breathing users and discerning what has value and what doesn't, while at the same time keeping up with the social media platforms that are developing at an equally rapid rate with their user activity.

"Facebook changes every other day," Alidina said. "Part of our job is just doing research and staying up to date so we can innovate at the same rate."

—By Matt Creegan, Special to CNBC.com.

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