Instagram & the Experience Economy
Since its launch in 2010, Instagram has become a cornerstone of cultural impact across many industries — tourism, entertainment, food, and so on.
Take this example: in the year 2010, only 800 people visited Trolltunga, a beautiful scenic rock in Norway.
But by 2018, 87,000 people were visiting it a year. That’s an 1,100% increase in 8 years!
What changed? Instagram.
All those scenic photos of Norway you see on your Instagram feed & on friends’ stories? They drive the discovery of places & experiences — for both tourists and locals.
Norway isn’t alone on this. Restaurants and coffee shops have started to put more emphasis on how their food looks (e.g. plating, colours) and transformed their layouts to appear visually pleasing (e.g. good lighting, bright colours). Museums, art galleries, retail stores… it goes on.
Instagram drives massive foot traffic for these places and experiences that position themselves as aesthetically pleasing and ‘Instagrammable’.
However, Instagram does not currently capitalize on this viral referral traffic it’s providing — it’s essentially free marketing for these businesses!
So, what should Instagram do about this?
Here’s what we know:
Millennials value experiences more than things.
A recent survey commissioned by Eventbrite found that almost 80% of millennials would prefer to spend money on a desirable experience or event, rather than buy something physical.
Visuals drive buying decisions.
You decide what to eat at a restaurant based on photos from Yelp. You decide where to hike based on your friends’ Instagram stories. You pick vacation spots based on what looks the most ‘Instagrammable’.
Instagram is already a hub for e-commerce discovery.
In 2019, Instagram launched Instagram Shopping, which let users tap on photos to discover, browse, and purchase the products seen in brands’ posts. It’s already used by over 130 million users a month — talk about impulse buys!
So, if Instagram already offers native product discovery & purchasing for physical goods… why not do the same for experiences?
The ‘experience economy’ is on the rise and shows no signs of slowing down (McKinsey report).
On Instagram, posts like the above are what I call ‘aspirational content’. They’re how you discover your next holiday getaway, your ideal honeymoon spot, and your long weekend plans.
Instagram is already the hub for where these experiences are discovered, but there’s a ton of friction in the post-discovery experience… you have to:
- Leave the app
- Search for the place on Google
- Find out where it is
- See when it’s open / available
- Figure out how much it costs
- Get directions on how to get there
What if you could do all of that — directly from Instagram?
In this post, I’m going to outline a strategy for new product idea: Instagram Experiences.
If I was a PM at Instagram, here’s what I would do to build out this new product:
Establish partnerships with vertical integrators.
So, you may be wondering — how will Instagram onboard all these businesses to use their platform? My thinking is they won’t need to; at least not initially. They can work with businesses who are already powered by integrations that drive the end-to-end online user experience, such as:
- OpenTable / Yelp for restaurants
- Kayak / Expedia for flights & hotels
- Ticketmaster for concerts & live events
Instagram could leverage these companies’ APIs to surface native scheduling, booking, payments, and reviews — all initiated from an Instagram post / story.
Imagine discovering the hottest new brunch spot from seeing a photo of their Eggs Benedict on Instagram. You could see reviews of the dish from Yelp, book a reservation on OpenTable, and get directions there via Google Maps.
Or imagine seeing the poolside view of a hotel in Santa Monica in an Instagram ad, being able to see flight prices there via Kayak, room rates via Expedia, and impulse booking your vacation itinerary — all right on the spot.
This approach means no additional work for these businesses; they’re simply re-purposing technology they already use on their websites.
Power payments via Facebook Pay.
In 2019, Facebook launched Facebook Pay; a unified payments system for Facebook, Messenger, Instagram, and WhatsApp — letting users pay people and businesses. It allows users to store a single credit card (or PayPal account) on file, which will then automatically be used for any purchases made on any of those apps (including Facebook Marketplace, Instagram Shopping, etc.).
Now, going back to my point about how Instagram needs to capitalize on the organic foot traffic it’s providing to all these businesses; here’s where they get their slice of the pie.
Bookings made via Instagram Experiences can be powered by Facebook Pay, allowing Instagram to take a commission fee on every transaction (this is usually around 2.6%). Given the cash Facebook has on hand, and the fact that this would be one of their many business lines, Facebook could even offer a lower commission fee as a competitive advantage, to incentivize businesses to use their platform over others.
Instagram brought in $20B of revenue last year (30% of Facebook’s total revenue); that number will rise for years to come as Instagram Shopping grows in popularity (and their ads business continues to thrive).
Suggest recommended experiences via the Explore tab.
Given it lives in the Facebook family, Instagram knows a ton about the content you prefer, and as a result, the types of things you’re likely to buy.
However, they can also make an educated guess about the places you’re likely to want to go / see. They have yet to capitalize on the latter, apart from ads; but the best ads are the ones that don’t feel like ads.
I propose that Instagram leverages the Explore tab (pictured below) to surface Recommended Experiences for you.
If you’re a foodie, imagine coming across photos of a restaurant’s new Happy Hour menu, then being able to book reservations for Friday night, on the spot.
Or if you’re a Drake fan, imagine finding his latest music video on Instagram, then being able to buy tickets to his concert, right there.
And for the SoulCycle diehards, imagine seeing motivational clips from your favourite instructors, then being able to book a class with them on the spot.
Tracking user engagement and conversion on these recommendations will help Instagram improve the relevancy of their recommendations algorithm, which in turn drives more bookings; a flywheel effect.
If this sounds familiar, it’s because it’s similar to the flywheel of Netflix’s business:
When put all together, here’s some example mockups for Google Maps & Airbnb Experiences that mirror how this could look on the Instagram app:
Some of the metrics I would use to track the success of this product would be:
- GMV (gross merchandise volume, $)
- Average bookings per user, per month
- % of users who make repeat bookings
- Impression → engagement conversion rate (%)
- Engagement → booking conversion rate (%)
This is a series of blog posts on how to improve some commonly used products. I’m on Twitter at @samir_javer if you want to say hello!