In fifties America, the average TV commercial ran to one minute.
Ad space on prime-time TV reached 90 per cent of the population.
It was the Golden Age of Advertising, if only for the money changing hands.
TV’s repute as a commercial medium increased demand from advertisers by orders of magnitude.
But networks couldn’t match supply, causing the price premium to increase.
The market was out of equilibrium.
Something had to give. Advertisers wanted to advertise. Networks didn’t have the space to accommodate them all.
One solution was to chop the length of a commercial first in half, and then half again, to fifteen seconds. Four times as many advertisers could utilise the same space.
Another solution was to shorten programming dramatically to squeeze in more commercials.
For every half hour of programming, eight minutes were given to advertisements.
That’s 32 messages where once there were four.
For license fee paying Brits, the sheer volume of commercials stateside is astounding.
There’s little doubt the barrage of messages ruins the viewing experience.
But that’s what happens when market equilibrium becomes unbalanced.
It’s Economics 101: Decrease the price to increase the volume, or increase the price to decrease the volume.
Such is the case with Facebook’s’ Instagram platform.
Since Instagram started selling ad space four years ago it has been vastly popular with advertisers.
As ad revenues flatlined elsewhere in Facebook’s business, Instagram has become a cash cow, outpacing its older sibling in growth.
But as its popularity increased, so did demand for its limited inventory.
In response Instagram could have increased its prices to balance demand.
It could have increased the volume of inventory to match demand.
Instead it did both.
All data suggests that Instagram ad prices are going up.
And the volume of advertising in its main feed has increased markedly.
Users are already complaining they see too many ads. Too many sponsored posts. Too many influencers.
Instagram is at saturation.
US TV found an equilibrium, however much it ruined the experience.
With Instagram, something’s got to give. It cannot squeeze any more ads in. It cannot increase its prices further. That time has passed.
It is at risk of alienating users by ruining the experience, and advertisers by being too expensive.
Instagram has attempted to diversify by doubling down on its Stories feature.
By promoting IGTV, its broadcast offering.
By trying to claw money from the many influencers who don’t use its paid promotion feature.
But none so far has given it the space to rebalance the price/ volume variable of its main offering.
The issues faced by twentieth century television and Instagram have similarities. The difference is that advertisers today have so much more choice.
Why invest in expensive crowded inventory?
Facebook has survived a barrage of regulatory, political, and public image issues. Could it be simple economics that brings about its decline?