Written by George Salapa in Business on the 10th July 2015

A whole 3 years have gone by since Facebook acquired Instagram and the App still does not make any money for its new owner. The company's CEO Kevin Systrom admitted in March 2015 that the company is still "not yet" profitable. Despite this most business analysts praise Facebook for its $750 purchase. Instagram should be the mecca of advertising. Two trends explain why. First, we are constantly bombarded by masses of information, which puts us under pressure not because it is spam, but precisely because it is all very important helpful and immediate. In our free time, we tend to avoid written word. We prefer pictures, because our brains can process images 60,000 quicker than text. Even Twitter is now too complicated. Too many messages; too many symbols. Like animals, we are beginning to communicate through gestures, poses and photos of ourselves. Shallowness and narcissism is the paradigm of our age and Instagram stands at its forefront.

Secondly, mobile has become our remote control to the world. Increasingly, we buy, communicate, learn and live on mobiles. Because so much of our interaction with the outside world is done through the device, it becomes the context generator about people. Collecting information about us, mobile gives the advertisers a unique insight into our psyche.

These trends disarm the traditional big media advertisers; yet they are great for Instagram. No other platform is so well-made to target our senses. Despite all this, the App fails to make money. Instagram is hardly a user-friendly advertisement tool. Lack of clear instructions, price list and procedures make it inaccessible to small businesses. A surprising fact, since it is a highly local social platform, where the users’ interactions are defined by their relationships and their locality. Unlike big media, therefore, it should be perfectly positioned to tap the small money - to sell to a mass of local smaller businesses. This is not to say that there is not have been an effort to monetize the App. 

Commercials are already part of the image feed that we see when we scroll through the Application. Even bigger money maker for Facebook could soon become the buy button, which enables instant (and what are hoped to be impulse) purchases. But Instagram's potential goes far beyond simple advertisement images and in-App purchases. It could become the perfect fashion marketing tool. Sophisticated algorithms can now recognize objects and products from images. With a pinch of fantasy, one can imagine that Instagram could use clever algorithms to sell to us products and brands from the pictures of our friends and people we admire. In the words of Scott Galloway, the NYU Stern professor and prominent trend analyst, the App will become a bridge between aspirational and real imagery. A pinnacle of direct marketing.

For Facebook, Instagram just like Oculus, another of its recent praised acquisitions, continues to be a project. Of all the possible reasons why Facebook has decided to acquire Oculus, the virtual reality technology company, gaming is the least likely. The real opportunity presents itself in the augmented reality e-commerce. There were two obstacles that crippled the development of e-commerce in past: the risk factor and the abstractness. Thanks to Amazon, the risk factor now almost does not exist. The company has profoundly transformed online retail, when it made customer deliveries free and returns smooth, thus forcing all other e-retailers to follow the suit or vanish. But buying online continues to be abstract. How a shirt will look on us, or whether it will fit, remains a product of our imagination. That is until we unpack the box to be pleasantly (or rather not) surprised. The augmented reality technologies should soon enable us to see our virtual self in virtual clothes right on the laptop screen while shopping online.

For some time now, fashion e-tail belonged to Made.com and MrPorter.com - catalogue-like online stores with few products, but many stories and inspiring pictures. James Dean in his Porsche 500 and a subtle suggestion about premium clothes that Mr Dean would wear if he wasn't dead. Icons have always been great for business, but they are dead now. Instead we have Instagram influencers. Facebook is about to become the ultimate fashion etail, linking the knowledge it has about us with new technology and control over our aspirations created by the Instagram influencers - easily controlled cohort of amateur celebrities.

*Phone, Hiker, Gym, Train images via Shutterstock

A look at how Instagram influencers are so important and why Facebook will become the next ultimate fashion shopping destination.