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Instagram to roll out video advertising in challenge to YouTube

Los Angeles

INSTAGRAM plans to sell advertisements in IGTV, its home for longer videos, a bid to compete with YouTube for a larger share of the booming market for online video.

Instagram started reaching out to its top video creators on Friday, asking them to partner on ad tests. Those in the programme will receive a 55 per cent share of all advertising in IGTV, the same rate as YouTube, said people familiar with the matter.

The company will start testing the ads this spring. "This is another step forward to help creators monetise with IGTV," Justin Osofsky, chief operating officer of Instagram, said in a statement. "To be sure we get this right, we are talking to a few emerging creators to help us test this and plan to expand slowly."

A lack of revenue sharing was one of the main reasons top digital stars stayed away from the IGTV format, which is separate from the main Instagram feed.

Within the main app, ads that look like regular posts already generate about US$20 billion annually in revenue, accounting for more than a quarter of sales at owner Facebook, people familiar with the matter said.

Facebook is relying on Instagram to fuel its next wave of growth, especially as its main social network faces a slowdown. Facebook, based in Menlo Park, California, does not break out numbers for Instagram.

Instagram currently has ads in its main feed of updates, as well as in its stories feature, in which posts disappear after 24 hours.

YouTube, the world's largest online video site, generated US$15 billion in advertising sales last year.

The total online video advertising market also includes Roku, Disney's Hulu and Amazon Video, and has been a hard nut to crack so far.

IGTV has struggled to attract users since its debut in June 2018, in large part because many of Instagram's most popular profiles have yet to post longer videos alongside their photos and brief stories.

Unlike YouTube, Instagram does not share advertising sales with creators. But that is about to change. BLOOMBERG