Instagram’s US user growth rate sharply decelerated last year, from 10.1% in 2018 to 6.7% in 2019, according to eMarketer’s latest social benchmark report.
EMarketer is also lowering its Instagram growth forecast, revised down from 5.4% to 4.5% in 2020, and 3.2% instead of 4.1% in 2021.
The main reason why Instagram’s growth forecast in the United States is being checked is because of unexpectedly slow traction with older age groups, in their forties and up.
Instagram is still showing strength with younger Americans. This year will be the first when the app has more users less than 25 years old than Facebook, said eMarketer principal analyst Debra Aho Williamson.
The user drop-off is acute with older age brackets. Instagram users between 25 and 34 years old grew at a healthy 11.4% in 2019, compared to the overall average of 6.7%
And the competition for social media attention among teens and young Americans is likely to intensify, Aho Williamson said, with apps like Snapchat and TikTok competing directly with Instagram.
But Instagram’s ad revenue and strategic value to the overall Facebook business may not be hindered by the declining growth rate or lack of older Americans.
EMarketer pegs Instagram’s 2019 ad revenue at about $9.5 billion, a 52.9% increase from the year before. In 2020 and 2021, earnings are expected to jump to $13.9 billion and $18.2 billion. The revenue growth rate is slowing, but largely because it’s approaching the law of large numbers, with 50% year-over-year growth no longer feasible.
Instagram’s advertising growth could be even more durable, Aho Williamson said, if the app proves out some of its new ad formats.
“Last year was a big year of experimentation for Instagram stories,” she said. “Advertisers want to continue, but I think 2020 is the year advertisers will need to see validation from the format.”
Instagram also launched a checkout product beta program and new shoppable ad units last year. If the app could successfully mature from an influencer marketing and product discovery hub to an actual commerce app, where people can purchase without exiting, Aho Williamson said it would strongly boost potential earnings despite any slowdown in user growth.
If anything, the slowdown in older users for Instagram only underscores how valuable it is for the overall Facebook book of business, considering the Facebook app has seen actual user decline (not just a decrease in the growth rate) among younger users.
Teens are more likely start with Instagram, and Facebook could centralize those users as they grow up, Aho Williamson said.
In November, Facebook introduced new corporate branding so Instagram, WhatsApp, Messenger and other subsidiary apps display “from FACEBOOK” when they load. The new logo is a sign that Facebook needs to ingratiate its core service with younger people using its portfolio of apps.
