IT’S THE FIRST DAY of class at Instagram. Students check in at two security desks and sign non-disclosure agreements before heading up to the photo-sharing app’s Manhattan offices. The 20 or so guests, almost entirely women, stride past the cluttered workstations of Facebook, Inc. engineers and into a conference room.
In attendance are executives and marketing managers from various fashion and beauty companies. Birchbox, a seller of makeup and bath products that’s raised $100 million and jump-started the subscription box craze, sent six. Another group from Madewell — J.Crew’s sister brand — sits up front. Big names from denim brand Ayr and Soludos take their seats. Even famed designer Cynthia Rowley makes an appearance, along with the president of her label. So does her daughter, Kit Keenan, an Instagram influencer who has been featured in Teen Vogue and Refinery29.
They’ve all come to learn how to make piles of money using the ubiquitous app. But the folks at Instagram have a lot to learn from them, too.
Vishal Shah, director of product for Instagram Business, told the assembled crowd that he wants to figure out how the platform’s most avid users buy things. “Shopping isn’t a linear journey,” he said. “It’s not even a funnel, in the typical sense. We actually refer to it as the noodle.”
That noodle is about to become the way a big part of the world consumes.
Once, Instagram was a simple photo-sharing app, a way for iPhone shutterbugs to show off their latest cool pics. Now, its visual nature and 1 billion active users have sellers salivating over its potential as a place to sell everything from dresses to furniture. Of those users, 150 million interact with the 25 million or so businesses that have a presence on the app. Instagram has counted a few retailers as partners — including Macy’s and J. Crew — but the platform remains an afterthought for other big names.
Bought by Facebook in 2012 for $715 million, Instagram has spent the past three years trying to solve this shopping puzzle. Everyone is already on their phone, and the mass migration from brick-and-mortar to online shops like Amazon.com is taking the next leap, into the palm of one’s hand and social media.
Yet hype around the dawn of “social commerce” has dissipated of late. Online shoppers have been slow to close their retail apps in favor of social ones. Even now, 54 percent of online buyers never make purchases that begin on social media, according to a 2017 report from visual search company ViSenze.
Smaller businesses are the ones that have found creative ways to hawk their wares on social. Young entrepreneurs are starting online stores that use Instagram to funnel shoppers to their websites. Vintage clothing retailers post outfits and reward the first commenter with permission to buy each one-of-a-kind item, creating a mad dash for dresses and pumps. If you’re too slow, it’s gone forever.
Instagram doesn’t facilitate these purchases, however. It’s all done manually by entrepreneurs. There’s a gap between Instagram and the retail world — a tech entity hoping to understand an industry more concerned with fashion cycles, inventory and merchandising than how to use a flashy new feature on the app.
The company has been studying expanding niches to find out how expert users create commerce — and spreading what it learns.
The class at its New York offices is meant to bridge that gap. “We really wanna invest in this,” said Susan Buckner Rose, director of monetization product marketing at Instagram. “Really, what we want is for these businesses not to just have an Instagram presence, but be able to leverage all these tools.”
Maximizing Instagram’s already huge presence is a good thing for Facebook, and not just financially. The photo-sharing app provides its parent the opportunity to regain some of the cultural cool it lost long ago. Even while Mark Zuckerberg’s social media monster is under sustained attack — for facilitating Russian interference in the 2016 US election, leaking personal data, and not blocking hate speech — Instagram remains unscathed. In fact, some consider Instagram to be Facebook’s savior, given its younger audience and concomitant marketing advantages.
On Facebook, there are neo-Nazis and St. Petersburg trolls. On Instagram, there are sunsets and avocado toast.
Instagram, in other words, is a carefree getaway from the daily grind. For many, that’s what shopping is, too. Bingo.
But it’s not alone in making this connection. The company is encroaching on territory coveted by Amazon and traditional retailers eager to grow online sales.
Amazon Fashion sells clothing through the store’s near-universal Internet presence, and now offers a try-before-you-buy wardrobe service. Department stores all have their own Instagram accounts, driving people to their websites either by promoting individual products or touting clearance events — but that’s just like traditional advertising, not true social commerce.
Instagram is looking to capitalize on this gap by being much, much more hip than everyone else.
Instagram East reflects this attitude. Artwork lines the walls of the Silicon Valley-based company’s new offices on lower Broadway, and there’s a juice bar where employees can grab drinks — in coconuts. On the day of class, there were whispers that fashion icon Donatella Versace was seen in the elevator. The new Instagram venue features a tiny mobile conference room styled after the opulent Versace mansion. She would later appear in a post alongside Eva Chen, the former Lucky magazine editor-in-chief Instagram hired in 2015 to be head of fashion partnerships.
Menlo Park has gone full-on Manhattan chic. The company has been courting fashion’s most prominent personalities and hiring big names — at the office, Chen has hosted streetwear icon Virgil Abloh and designer Prabal Gurung. She also holds master classes for influencers. At the 2018 Met Gala (not exactly tech-nerd home turf), she shared a photo of her with Instagram Chief Executive Officer Kevin Systrom, posing with a who’s-who of Instagram’s biggest beneficiaries, including Kim Kardashian, Kendall Jenner and Bella Hadid.
Kay Hsu, Instagram’s creative lead, is a key figure in convincing brands to use Instagram. She attends festivals in London and Cannes to dish about the company’s new strategy. She’s appeared on podcasts with AdAge and written articles for Adweek to explain why businesses should use vanishing content to draw consumer attention while, of course, plugging Instagram.After Shah’s introductory remarks, she took the New York class in hand. What works, then? She spent an hour explaining. You see, amateurs often have to create their photo-shoots from scratch, without all the expensive equipment, and since they don’t have to ask anybody for permission, they can constantly try new things, she said. Shah and Hsu called out various brands that were doing Instagram right, such as shoe label M. Gemi and fitness guru Kayla Itsines. They brought up several campaigns worked on by the marketers in the room and dissected why they were, or weren’t, successful. Itsines, the 27-year-old Australian, uses the app to both grow brand and business. On her account, which now has about 10 million followers, she mixes their photos with workout tips and promotes her own events. Itsines may not be filling her posts with buttons to buy dresses or eyeshadow, but she’s attracting newcomers to her business nonetheless. Later, a series of posts shared by Birchbox flashed on the screen. Two performed well; the other two did not. The appeal of Birchbox, Hsu explained, is the satisfaction of discovering new items when the box arrives in the mail. People enjoy it so much they film and post YouTube videos bragging about their latest haul. So the Birchbox Instagram videos that reveal many different new items to viewers tended to fare better than those that only featured one, she concluded.
Hsu talked about the role of influencers, those social media stars whose followers keep up with everything they do and wear. They’re the envy of all — everyone, it seems, is still hoping to catch up to them. “Right now, those 13-year-olds are doing better content than any of us in here,” she said, then pauses, remembering who is in the room. “No offense.”
While its executives explain what works, Instagram is still trying to learn, and not just from its own users. A variety of startups have bought into social commerce, albeit with their own platforms.
Poshmark, which started in 2011, has raised more than $150 million for its social marketplace, where its “seller-stylists” build their own online storefronts to share with friends. Lyst has raised about $60 million for its peer-recommendation marketplace. The tech giants have their own versions, too — Pinterest began offering buyable pins in 2015, and even Instagram-parent Facebook launched a marketplace in 2016. Facebook rose 89 cents to $195.21 at 10:45 a.m. Monday.
But many of these sites don’t feel all that different from traditional desktop shopping. Community-based bazaars such as Etsy and Poshmark have you browse through individual online storefronts tied to its army of crafters. Design sites Threadless and Cut On Your Bias are more participatory, allowing for collaborative design of new items. Then there are group-purchase services such as Groupon and LivingSocial, which provide flash sale deals if enough people sign up.
On Instagram, the process of buying something can start on the app, but it doesn’t end on the app. Merchants on platforms such as BigCommerce and Shopify can tag products in their Instagram posts, and little boxes designate what’s available for purchase. You can click to find the product description, which appears with more information. Then, you click through to the retailer’s own website, where the item is listed, and complete the purchase there.
While there are numerous ways to present what’s for sale, right now retailers use Instagram’s static feed of photos and sometimes videos. Instagram recently added the ability to sell on Stories, a feature that allows users to post photos and videos that disappear after 24 hours. Executives said they predict there will eventually be a crucial shift from feed-based social media to stories.
Back at the classroom, the students had questions. Why can’t you add tags for both people and products in the same Instagram post? Are you going to make people buy directly on Instagram, rather than click through to a retailer’s website? Why aren’t you allowing longer videos? Are you working on any tools for customer service? Can you make it easier to manage direct messages? Are you investing in desktop at all?
“The color-optimization is usually spot on, but sometimes — it’s not?” someone from Birchbox said near the end of the session. Shah seeks to reassure her.
“Nothing specific to announce right now,” he said, “but know that we’re thinking about it.” — Bloomberg

AGED JUST 20 and the youngest member of the extended reality-TV Kardashian clan, Kylie Jenner is on track to become America’s youngest “self-made” billionaire, Forbes revealed Wednesday.
The young mother, who gave birth to daughter Stormi in February, set up Kylie Cosmetics two years ago and the company has already sold more than $630 million worth of makeup, the magazine said.
Forbes conservatively valued her company at $800 million and raised her overall worth to $900 million by throwing in earnings from television programs, endorsements and after-tax dividends.
Jenner owns 100% of the company, which started out with a $29 “lip kit” — matching set of lipstick and lip liner that traded on her trademark pout.
She’s already the youngest person on Forbes’ list of richest self-made US women and another year of growth would make her the youngest self-made billionaire ever, beating Mark Zuckerberg, who crossed the threshold at the age of 23.
“Thank you @Forbes for this article and the recognition. I’m so blessed to do what I love everyday,” she tweeted next to a photograph of the cover story.
Her success has been attributed to her fame and ability to leverage social media. She has more than 110 million followers on Instagram, 25.6 million on Twitter and 16.4 million follow her company directly.
Forbes said the firm has only seven full-time and five part-time employees, with manufacturing, packaging and sales outsourced, and momager Kris handling the business side in exchange for a 10% management cut.
“As ultralight start-ups go, Jenner’s operation is essentially air. And because of those minuscule overhead and marketing costs, the profits are outsize and go right into Jenner’s pocket,” Forbes wrote.
Jenner is the youngest daughter of Kris and Caitlyn, formerly Olympic gold medalist Bruce. Her sister is supermodel Kendall. Her half-sisters are Kim, Kourtney, and Khloe Kardashian.
Reality TV show “Keeping Up With the Kardashians” launched when Kylie was 10 years old. Aged 17, she trademarked the phrase “Kylie Lip Kits… for the perfect pout.”
Forbes said she used $250,000 earned from modeling to pay a company to produce the first 15,000 lip kits, which she spent months teasing on Instagram. They sold out in less than a minute at the November 2015 launch.
That May, Jenner had admitted to having temporary lip fillers. On Sunday, she revealed on Instagram that she had ditched them. — AFP

TWITTERATI, get ready for your digital ego to be bruised.
The social media company warned on Wednesday that its crackdown on fake accounts means users will have fewer followers.
When Twitter, Inc. detects sudden changes in behavior, like spammy tweeting patterns or sharing of misleading web links, it contacts the owner to confirm control of the account. If the owner doesn’t respond and reset their password, Twitter locks the account. This week, the company said it will remove these from profiles, reducing the number of followers users have.
“Most people will see a change of four followers or fewer; others with larger follower counts will experience a more significant drop,” Vijaya Gadde, Twitter’s head of legal, policy, trust and safety, wrote in a blog. “Follower counts are a visible feature, and we want everyone to have confidence that the numbers are meaningful and accurate.”
The company recently said it’s identifying almost 10 million dubious accounts a week and is putting all accounts through a security check. The stock slumped earlier this week on concern the crackdown would dent user growth. While it excludes spam accounts in reported user data, Twitter noted early this year that monthly active user numbers would be “negatively impacted” by efforts to expunge fake accounts.
Removing locked accounts from follower counts won’t impact Twitter’s monthly or daily active user metrics, the company said on Wednesday.
“Our digital ecosystem is being polluted by a growing number of fake user accounts, so Twitter’s commitment to cleaning up the digital space should be welcomed wholeheartedly by everyone, from users of the platforms, to creators and advertisers,” Unilever Chief Marketing Officer Keith Weed wrote in an e-mail to Bloomberg. “People having an artificially inflated follower count made up of bots and redundant accounts is at best deceiving and at worst, fraud.”
Unilever was among the major companies that threatened in February to pull advertising from social media services, including Twitter, because of a rise in hate speech, abusive content and fake news. Bloomberg LP produces TicToc, a global breaking news network on Twitter. — Bloomberg

IN LATE JUNE, Spencer Chen got an unusual notification from Instagram. The app prompted him to check out a friend’s new photo—on Facebook. Chen grabbed a screenshot and posted the notification on the internet, calling it a cry for attention by the older social network. It felt like a cheap trick, he says, like “placating big brother in the Facebook building.”
Chen is one of the tens of millions of people who used Instagram before Facebook Inc., acquired the photo-sharing app in 2012. Ever since, he says, he has anticipated the day when Facebook would start messing with the photo app to suit its needs. That day, he says, has come.
There’s no denying the power dynamic between Facebook and Instagram is shifting. Instagram has 1 billion users, more than Facebook had at the time of the acquisition. The property is worth more than $100 billion, according to a recent analysis by Bloomberg Intelligence. And Instagram keeps growing among a younger set of users who are critical to Facebook’s growth. Also, Facebook users have been flocking to Instagram’s photo- and video-based app as an escape, tired of the political bickering and privacy scandals that plague the parent company. Users averaged 53 minutes a day on Instagram in June, just five minutes less than on Facebook, according to Android data from analytics company SimilarWeb. As growth of its user base slows, Facebook’s future is more certain with Instagram than without it.
“We would not be this confident in Facebook’s future if it wasn’t for Instagram,” says Rich Greenfield, an analyst at investment bank BTIG. “They’ve done a really good job with the cross-pollination.” That’s a big change from the years right after the $715 million acquisition, when Instagram depended on Facebook for advertiser relationships and the infrastructure needed to grow.
Instagram says what Chen experienced was a product test with a small contingent of users. Still, Instagram feeds Facebook in other ways. Last year, Facebook launched its own version of an Instagram tool called Stories, which lets people post videos that disappear within 24 hours. (The feature was initially copied from Snap Inc., a competitor.) Greenfield noticed the Facebook version became more popular once it became possible for Instagram users to post their stories in both places with the click of a button.
Instagram Stories’ 400 million users present a significant opportunity for Facebook’s advertising business, according to Ken Sena, an analyst at Wells Fargo Securities. Instagram is on track to provide Facebook with $20 billion in revenue by 2020, about a quarter of Facebook’s total, he wrote to investors. And cross-posting could help Facebook’s video ambitions. The company recently launched Facebook Watch, a television-like platform that it’s spent hundreds of millions of dollars on, mostly for content. That was followed by the rollout of Instagram’s IGTV, an app that allows anyone to produce and post longer-form videos. Instagram has a more natural relationship with influencers, who have built up huge followings on the platform, so it hasn’t had to pay for them to use the new feature. Any of them can decide to cross-post their videos to Facebook. “Maybe that becomes a driver for Facebook Watch over time,” Greenfield says.
“We would not be this confident in Facebook’s future if it wasn’t for Instagram”
So far the company hasn’t taken advantage of that opportunity, according to Krishna Subramanian, who works with top digital celebrities at Captiv8, a firm that measures influencer marketing. While “it does seem like Facebook is continuing to test notifications within Instagram,” he says, “from what we see on our side, it still looks like Facebook and Instagram are very separate products.”
What could lead to closer ties in the short term are some executive moves that went into effect in May. As part of the shuffle, the biggest in Facebook’s history, Chris Cox, its chief product officer, took charge of Instagram, WhatsApp, and Messenger, in addition to the main app. Adam Mosseri, the former head of Facebook’s news feed, was named vice-president for product at Instagram, reporting to Instagram co-founder and CEO Kevin Systrom. Mosseri has been at the company 10 years and has deep relationships with Cox and Chief Executive Officer Mark Zuckerberg. “Adam has personally helped build a lot of the Facebook experience you use on your phone today,” Zuckerberg wrote about Mosseri on his Facebook page this week.
The company often talks to advertisers about all its products collectively. According to a person familiar with the matter, Facebook recently started an incentive campaign with some brands that covered three products at once: ads on Instagram Stories, on Facebook Messenger, and in the middle of Facebook videos. The person, who declined to be named for fear of losing the Facebook relationship, says it was the first time his client had received such an offer.
“The promo you heard about is not unique,” Instagram said in a statement. “We are continuously working with advertisers to help them find and discover the best formats for ads across the Facebook Inc. family.” — Bloomberg

JUST EIGHT COUNTRIES are responsible for most ocean plastic. They need help.
Since Jan. 1, when China stopped accepting the rich world’s recyclable plastic waste, it’s gotten a ton of criticism for worsening the already deep crisis of ocean plastic pollution. But China isn’t the only culprit here. This is a crisis made — and growing worse — throughout developing Asia.

Just eight countries in the region are responsible for about 63% of total plastic waste flowing into the oceans. Little of that junk has been exported by rich economies. Instead, it’s almost solely generated by Asia’s newly minted consumer classes, the vast majority of whom lack access to garbage collection, modern landfills and incineration. Any progress in reducing ocean plastic will have to start with them.
A boom in garbage is almost always the result of two related phenomena: urbanization and income growth. Rural dwellers moving to the city shift from buying unpackaged goods to buying stuff (especially food) wrapped in plastic. As their incomes rise, their purchases increase. That growth in consumption is almost never matched by expanded garbage collection and disposal. In typical low-income countries, less than half of all garbage is collected formally, and what little is picked up tends to end up in unregulated open dumps. In 2015, scientists estimated that as much as 88% of the waste generated in Vietnam is either littered or tossed into uncontained dumps. In China, the rate is about 77%. By comparison, the US rate is 2%.
Every big city in developing Asia faces this problem. Jakarta’s waterways are choked with plastic trash. In Kuala Lumpur, instances of open dumping line the high-speed train route to the airport. On the outskirts of any Chinese city, loose plastic bags and instant-noodle cups litter every road’s shoulder. Much of this junk ends up in waterways — and, eventually, the ocean. One study found that eight of the 10 rivers conveying the most plastic waste into the oceans are in Asia. China’s Yangtze alone delivers 1.5 million metric tons of plastic to the Yellow Sea each year.
Solutions to all this have proved chronically elusive. China has prohibited retailers from providing free plastic bags for a decade, to almost no effect. In Indonesia, long-standing efforts to tax plastic bottles and containers have run into the reality that few locals have access to piped or uncontaminated water. Although recycling is common in Asia, plastic presents an often insurmountable challenge: Technical and environmental factors render much of it unrecyclable, especially in developing regions. In fact, only about 9 percent of plastics are recycled globally.
Yet there’s another, far more promising option: Improve regular old trash collection. A recent study by the Ocean Conservancy and the McKinsey Center for Business and Environment found that boosting trash collection rates to 80 percent in just five Asian countries — China, Indonesia, the Philippines, Thailand and Vietnam — could reduce ocean plastic waste by a whopping 23% over a decade. No other solution can promise such an immediate or lasting impact.
Pulling it off won’t be easy. Garbage collection and disposal is often the most expensive line-item on city budgets in the developing world, and achieving the study’s goal would require $4 billion to $5 billion per year. But that’s not impossible: In the UK, aid organizations are pushing the government to spend 3% of its annual foreign aid on waste collection and disposal in the developing world (currently, it spends 0.3%). If that goal were adopted by other rich countries, it could be a game-changer for ocean plastics.
The private sector could also help. An American advocacy group called Closed Loop Ocean is raising $150 million from global corporations — including 3M Co., Coca-Cola Co., and Procter & Gamble Co. — to invest in scalable waste collection and disposal businesses in India and Indonesia. Petrochemical and plastics companies should be next to join.
All this is just a start, of course. Developing Asia will eventually need many more modern landfills, incinerators and self-funding recycling programs. But for now, one reform could have a bigger global impact than just about any other: Start picking up the trash.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners. — Bloomberg

A NONPROFIT investment manager is starting a group of “socially responsible” exchange-traded funds (ETF) that could change the face of values-based investing. Their twist: a little help from the experts themselves.
Impact Shares Corp.’s NAACP Minority Empowerment ETF, ticker NACP, is expected to start trading Thursday on the New York Stock Exchange. The fund is the first in what the firm hopes to be a series of ETFs that hone in on single issues rather than broad ESG strategies that focus on environmental, social and governance issues all together.
Each Impact Shares ETF will be created in collaboration with a leading nonprofit to set the qualifications for companies in the fund. In this case, that nonprofit is the NAACP. And in return, the organizations get the fund fees after Impact recoups its operating costs, meaning the NAACP will receive about $5 a year for every $1,000 invested in the fund, which charges investors $7.50, according to Ethan Powell, the founder of Impact Shares.
“Not only are you creating a portfolio that’s reflective of your individual social values, but you also have a great degree of credibility behind the social implications,” he said. “It’s not a bunch of middle-aged white dudes sitting in a room wondering, ‘Hey, I think women and minorities meet X, Y or Z from corporate America.’ It’s YWCA that’s been advocating for women for 160 years, it’s the NAACP that’s been advocating for people of color for over 100 years.”
Impact, which is based in Frisco, Texas, plans to launch its women’s empowerment ETF in partnership with YWCA Chicago on Monday, Aug. 27, the day after Women’s Equality Day and the anniversary of the passage of the 19^th amendment granting women the right to vote in the US, Mr. Powell said. Other funds in the works will partner with organizations such as the United Nations, the American Heart Association and Facing Addiction in America. Future products could tackle topics such as access to infrastructure, heart health, opioid addiction, health care and gun control.
Socially active ETFs have been around since 2005 and their popularity has increased in recent years. However, many investors have criticized ESG funds for everything from their performance to their stock picking methodologies. Impact Shares aims to overcome selection issues by directly tapping the expertise of its nonprofit partners. And investors know that their fund fees are going directly to the charity they invest in.
The Rockefeller Foundation has also come on board, as a source of funding and to help link Impact with nonprofits. To Adam Connaker, senior program associate at the foundation working on its “Zero Gap” innovative finance portfolio, there’s reason to invest in a socially focused product such as the NAACP fund and not just make a one-time donation, notably because this gives the nonprofits influence in the private sector.
“You’re giving a tool to the NAACP or whoever it might be that they don’t currently have,” he said. “So it really gets more impact out of the dollar that you’re spending.” — Bloomberg