Instagram, a Facebook-owned platform has just announced new features to entice smaller businesses to advertise there. The new “Instagram Business Tools” will allow users to talk to companies on the app, and will offer companies the opportunity to view the engagement and performance metrics for its content. Companies can also promote posts (similar to Facebook) directly through the app.

Why Should Small Businesses Care?

Instagram allows companies to showcase their products in a visually appealing way and has over 400 million monthly active users. While this number pales compared to Facebook’s 1.5 billion users, it is significant because Instagram adds even more data to Facebook’s already enormous stockpile of information on its users. This information is made available to marketers, who use it to find customers.

Here is Instagram’s answer to the question: “How does Instagram decide which ads to show me?”

We want to show you ads from businesses that are interesting and relevant to you, and to do that, we use information about what you do on Instagram and Facebook (our parent company) and on third-party sites and apps you use. For example, you might see ads based on the people you follow and things you like on Instagram, your information and interests on Facebook (if you have a Facebook account) and the websites and apps you visit.

What Facebook Knows

Facebook has been collecting information on its users from the beginning. Filling out the ubiquitous Profile gives Facebook information such as, whether you are married or single, gay or straight. It knows if you have children. It knows your level of education. It not only knows what city and state you live in, but also your neighborhood. It knows where you work and what professional skills you have. You have probably listed your favorite sports teams, books, movies, television shows and the games you like to play. It has tracked the locations you have visited. It knows the Business Pages you like and Groups you have joined – and that’s just what they know about you from your Profile. Facebook also tracks your behavior on their properties and across the Web.

This information isn’t a secret, and it probably doesn’t bother you too much that it is out there, but Facebook knows how valuable this information is to marketers. While Facebook does not identify specific users, it is able to evaluate the totality of information about each of us and make decisions about the content – and ads – that will get our attention and (hopefully) inspire the desired action.

Big Data

The Google definition of Big Data gives us clues about how important information gathered by Facebook really is:

“Extremely large data sets that may be analyzed computationally to reveal patterns, trends, and associations, especially relating to human behavior and interactions”

It other words, the proper use of Big Data allows marketers to zero in on who might be interested in what their clients are selling.

The Goals of Advertising Have Not Changed

Before the Digital Age, advertisers had ways to gather and use data. Direct mail advertisers might use Zip Codes to target upscale neighborhoods. Television ads were placed on shows that were designed to appeal to certain demographics. Daytime “Soap Operas” targeted housewives. Most of us also remember Saturday morning cartoons with the constant barrage of commercials touting sugar-laden cereals and Mattel toys.

How We Advertise Has Changed

The goal of targeting the “right” people has not changed. What has changed is the way people make buying decisions. 75% of customers say they use social media as part of the buying process. (Biznology)

But that is just the beginning. Today, it is possible to reach people even when they don’t like a Business Page. Ads on social sites like Facebook and Instagram are shown to people that fit a precise profile, whether or not they like the Business Page. This allows for more focused targeting, and means less money is wasted on advertising to the wrong people. Put another way, it gives businesses a definite “leg up” in having their messages received by the right people.

And Things Keep Changing

Facebook recently announced that ads created in Facebook can now be seen even by people who don’t have a Facebook account. The ads will be shown through their “Audience Network,” which expands the reach of ads far beyond Facebook, and competes directly with Google. This, along with Instagram’s “Business Tools” should give any small (or large) business owner food for thought.