Instagram tries to steal ad dollars from Snap by proving it drives sales

James Quarles
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As competition for digital advertising dollars heats up, Instagram is unveiling new features to prove how often its app drives sales.

In a few months, Facebook-owned Instagram will let users directly book services like haircuts, Instagram vice president of business James Quarles told CNBC. Not only will the transactions occur on the platform, it will show companies how much business is deriving from their presence on the app.

Additional in-app profile features will also allow people to find directions, call and email the businesses. The company is also adding new insights to its business dashboard so brands can see the physical actions people are taking after seeing their Instagram ads.

"If you're a small business, Instagram is a place where people are seeking passion," Quarles said. "Eighty percent of people on Instagram follow a business."

Instagram said 8 million companies use its business profiles on Wednesday, up from 1.5 million in September 2016. There are 1 million advertisers on the platform, an increase of 400 percent year over year.

Instagram's growth — in particular the growth of its Stories feature — was one of two factors that compelled BTIG to recommend a buy rating on Facebook on Tuesday. Analyst Rich Greenfield told CNBC the additional content provided more material to advertise against, helping Facebook balance its ad load problem.

Advertising budgets are split between experimental projects and things that will provide a return on investment (ROI), Quarles noted.

Many companies have placed Snap in the experimental category, but advertising agencies say it is inching over to a must-buy in order to reach younger users. But one of the big complaints is it can't prove ROI, though it has added features to meet advertiser demands. By offering these tools to help advertisers measure ROI, Instagram could steal some ad dollars away from Snap.

"We very much want to be part of that second budget, the latter which is measured by physical action," Quarles said.