With 150 million daily active users, Instagram Stories is launching ads

Just five months after its debut, Instagram Stories — and the 150 million people using it every day — are no longer free real estate.

Instagram will begin inserting video ads into the Snapchat-like Stories experience and add more analytics features for businesses, the company announced on Wednesday.

The news marks one of the fastest introductions of ads into a product for Facebook, which typically plays the long game in monetizing new features. Facebook bought Instagram in April 2012 for $1 billion, then took almost three years to introduce ads across the platform.

The introduction of Stories was met with some skepticism, particularly as it seemed a direct clone of Snapchat's Stories feature. That hasn't done much to temper consumer interest. Instagram announced on Wednesday that 150 million people use Stories every day.

That daily user number for Instagram Stories now matches Snapchat's latest daily statistic, making it all the more compelling for advertisers to embrace Instagram Stories and perhaps shy away from Snapchat if they hadn't already been building for it.

The speed with which Facebook has brought ads to Instagram Stories speaks to its growing competition with Snapchat, which has a head start on innovation but lags on scale. Instagram Stories and ads are, for now, limited to 15 seconds of video. Meanwhile, Snapchat can offer more immersive ads such as sponsored lenses and swipe-up to watch a video.

But when it comes to what advertisers want, many are looking for more data and insights rather than wanting to invest in a creative format they aren't quite familiar with. That's where Facebook and Instagram thrive.

Ads will not appear within a user's Instagram Stories content, at least not yet. Advertisers can create a video or a slideshow of photos that lasts a maximum of 15 seconds but could be as short as they choose. Ads can also include sound, and according to Instagram, 70 percent of watched Stories are viewed with the sound on.

To begin, Instagram is testing ads with about 30 clients, including Capital One, General Motors, Buick, Nike, Yoox, Netflix, Qantas and Airbnb.

Home rental startup Airbnb, for example, is using an ad in Instagram Stories to promote Trips on Airbnb.

“By creating and publishing experience-driven stories, we can truly captivate and reach travelers wishing to book aspirational trips on Airbnb," Eric Toda, global head of social marketing and content at Airbnb, said in a statement.

Advertising in Stories isn't at all surprising. Instagram said at the launch of Stories that it had plans to introduce advertising and more business tools. Ad Age reported earlier this week that Instagram was considering sponsored stories, where advertisers could pay for access to the top of a user's feed. For now, Instagram is only offering mid-roll spots.

But it is intriguing that the introduction comes as soon as Instagram hits the same level of daily usage as Snapchat.

"We built the product for consumers and saw great adoption there," said Vishal Shah, director of product management at Instagram. "It's kind of a fine art. There's never a 'We hit this thing and all the sudden this happens.' We usually follow a pattern where we see consumers and businesses engaging on the platform."

Indeed, Instagram Stories has taken off in popularity. Instagram announced in October that it reached 100 million daily active users for Stories just under two months after the feature's release. More than 600 million people use Instagram each month. Snapchat does not disclose monthly numbers.

To the benefit of Instagram's future revenue prospects, about 70 percent of users are following a business and one-third of the most viewed Stories are from businesses.

Ads within Instagram Stories will have access to Facebook's targeting capabilities, such as age and affinity groups, just like the other ads in Instagram. Shah admitted that from a consumer product perspective Instagram took "a lot of cues" from Snapchat but that when it came to advertising, it integrated its own infrastructure.

"Everything that's available in the Facebook infrastructure will also be available on Stories with the benefit of these format, fully immersive, full screen," Shah said. "We think these combined, the format plus our advantage on the backend side are a really unmatched experience than what's in market today."

Snapchat has been quietly introducing several features to improve the ad experience, several of which are present in Facebook's mobile ad ecosystem.

Yet, one big deterrent that advertisers face is the high price of Snapchat ads. "The ask there can be quite demanding for a traditional advertiser that may not understand what the value is around Snapchat," said Jeff Carvalho, partner and chief strategy officer of creative agency Highsnobiety.

The ads for Instagram Stories will be sold at auction and therefore pricing is set based on demand.

Along with the opportunity to purchase ads, all businesses on Instagram soon will have access to an enhanced suite of insights. Business owners can see reach, impressions (re-watching), replies and exits for each story and filtered for the last day, week or two weeks. Prior, businesses were only limited to see view count and a list of viewers just like any user on Instagram.

Already, the numbers are in favor for Instagram. TheAmplify, a platform for creators, found from a sampling of influencers with an average of 600,000 followers, Instagram Stories received 28 percent more views than similar stories on Snapchat.

"Influencers are driving links now through Instagram Stories. They’re using this as a conversion funnel," said Justin Rezvani, founder and CEO of TheAmplify.

It's far from over for Snapchat. The company's 150 million daily active users isn't anything to scoff at, and its ad product is far more expansive than Instagram's for now.

As Mashable wrote at launch, Snapchat has engineered desirability into its advertising, with sponsored geofilters and lenses, as well as video ads.

"Instagram is much more traditional digital advertising at its best: fairly standard display formats, but very native, valuing quality over quantity. Snapchat is another beast entirely," Ari Brandt, CEO and co-founder of digital ad company MediaBrix, said last year.

"We always tell advertisers, make sure you're spending your dollars on where you can achieve the results you care about," Shah said. "We'll build the best possible products that hopefully drive the best business results and hope that the budgets come our way."