Instagram’s IGTV to soon show ads, will compete YouTube

Instagram started reaching out to its top video creators on Friday, asking them to partner on ad tests. Those in the program will receive a 55% share of all advertising in IGTV, the same rate as YouTube.

Silhouettes of mobile users are seen next to a screen projection of Instagram logo. (REUTERS)

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 program will receive a 55% share of all advertising in IGTV, the same rate as YouTube, according to people familiar with the matter. The company will start testing the ads this spring.

"This is another step forward to help creators monetize 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 $20 billion annually in revenue, accounting for more than a quarter of sales at owner Facebook Inc., people familiar with the matter have 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, doesn't break out numbers for Instagram.

Instagram currently has ads in its main feed of updates, as well as in its stories feature -- the one featuring posts that disappear after 24 hours.

YouTube, the world's largest online video site, generated $15 billion in advertising sales last year. The total online video advertising market also includes Roku Inc., Walt Disney Co.'s Hulu and Amazon.com Inc.