Instagram's head of business says that there's 'definitely headroom' for stuffing more ads in the app - and it shows how vital Stories are to Facebook's future

• Instagram is increasingly becoming Facebook's prized procession for advertising growth, particularly with the Stories ad format.
• Head of business Jim Squires told Business Insider that the app's ad load will likely increase as it bulks up on Stories ads.
• He also said Instagram is investing heavily in commerce as a complement to the ad business.
• Instagram is also trying to get marketers to use its long-form video feature IGTV more. Squires said marketers that use Stories should start thinking about uploading similar creative to IGTV.
• Visit Business Insider's homepage for more stories.

Jim Squires helped spearhead some of the first advertisements in Instagram feeds in 2013. Now, he's helping marketers make the shift from feeds to Stories, the vertical-oriented photos and videos that appear at the top of the app that can only be viewed for 24 hours. Facebook is betting big on to fuel the next wave of the company's growth.

Two years into the launch of Stories ads, three million advertisers are using the format, thanks in part to its low CPM (cost per 1,000 impressions). Still, some marketers struggle to find creative that can run in the vertical format.

Meanwhile, Facebook and Instagram's ad prices are rising, leading some marketers and investors to wonder when ad loads will hit a threshold in Instagram. But Squires said Instagram hasn't reached its saturation point and would likely increase its ad load over time.

"With Stories, we're still in a build-and-develop mode, but as there's more advertisers in the auction and people get more accustomed to interacting with businesses in that environment, there is headroom for more ad load there," he said.

Squires spoke with Business Insider about how he talks to marketers about Stories, Instagram's move into e-commerce and what Facebook's new privacy focus means for advertisers. Below is an edited version of the conversation.

Read more: Facebook is reorganizing its products team, bringing ads and free products for businesses under one umbrella

Lauren Johnson: How are you talking to advertisers about Stories?

Jim Squires: When feed was introduced, there was a long process we went through to create this new format with feed. I hear a lot of those same questions with Stories.

There are three million advertisers across all Stories ads, but there's still a lot of opportunity. The CPMS have come up but it's still lower than the feed.

That's just one dimension to it. It's full-screen and typically the sound is on [so] we've tried to make it easy to take assets that marketers already have and auto-convert them into Stories.

Johnson: What's the biggest change with Stories?

Squires: One of the biggest insights is if you're not using [Stories] personally, you don't know how it works. We've worked with marketers to understand is that people are moving so quick that those first couple of seconds are so critical to communicate a message, hook people and bring them in. That's important for feed but it's even more important in Stories.

It's still early but the polling sticker within ads has created a deeper interaction.

Johnson: Are marketers running different Stories in Facebook and Messenger than they are in Instagram?

Squires: In an ideal state with infinite budgets, you would think about every single medium and do specific assets for that because you want to do something that's going to feel right at that moment in whatever environment you're in. That's not practical all the time. With Stories, you have similar formats and the ability to take it across different places. All the platforms have gotten quite big - it's hundreds of millions of people.

Johnson: How do Stories factor into Instagram's growing ad load?

Squires: It comes with always thinking about the experience for people first. We think then about businesses and creators, and we think about our business last.

With Stories, we're still in a build-and-develop mode, but as there's more advertisers in the auction and people get more accustomed to interacting with businesses in that environment, there is headroom for more ad load.

Johnson: Instagram has also doing some new tests with commerce and in-app checkout. How big of a bet is commerce for Instagram?

Squires: We're investing heavily in this. We view the shopping piece as a big opportunity for businesses and marketers.

The check-out is a piece of the overall shopping initiative. We're trying to remove friction from the customer journey. We call it 'serendipitous shopping,' where you're not in the shopping mindset but you're looking for inspiration. You see a product that sparks your interest and you want to go learn more and potentially make a purchase or come back to it.

The other use case is what we call 'window shopping,' where you are in a shopping mindset but there isn't a specific product you're searching for to purchase. You have 200 million people going into the Explore channel to find new types of content or accounts to follow. We introduced a shopping channel inside of Explore to get into this mode.

Check-out is a natural extension of that. The results have been great, which are really early days, because it makes it so easy to make those purchases.

Johnson: Shopping is a non-advertising revenue source for Instagram. How much are you pushing the lever on it versus advertising?

Squires: They're very complimentary. You can imagine over time wanting to bring shopping posts and content to new audiences that aren't following [an account]. It's one more signal on things that you may be interested in seeing inside of feed and Stories. Ultimately we want advertising to be a reflection of your interests.

Johnson: Instagram's IGTV launched as being focused on vertical video and now supports horizontal video. Why make that change and when will the feature will become a monetization tool for publishers like Facebook Watch?

Squires: It's very different from Watch from a content-experience perspective. The heavy emphasis is more on creators, who are individuals, public figures, celebrities that are creating content around a specific interest. There's creators like Lele Pons who has 34 million fans - that's where we've seen IGTV seen.

Read more: Facebook is going right after the $70 billion TV ad market - by adopting some of the TV industry's sales techniques for Watch

I'm really happy with the growth we're seeing on it, especially for a completely new use case. Things like being able to tease and promote IGTV within feed and Stories has been a big boon for IGTV because now you've got these complementary surfaces that all work together.

Horizontal video should allow more great content to come in from creators for people. It's expensive to make great content for people so you can imagine over time us continuing to introduce ways of establishing their livelihoods on the platform.

I am recommending with marketers that all the work being done within Stories and vertical creative in the future will be applicable inside of IGTV as well.

Johnson: Mark Zuckerberg has laid out a new privacy-focused vision for Facebook. How should marketers be thinking about the move to ephemeral messages and encryption?

Squires: First and foremost its about the experience that people have on the platform, and so that might introducing different features in the front-end experiences that people have on Facebook, Instagram, WhatsApp, etc.

On the back-end, we've always wanted to make it easy to create content that can work across those platforms like automatic placements. It allows you to have a lot of flexibility in setting something up once and then allowing the system to find the most reach and drive a specific business objective.

As you move into different areas like messaging, Instagram Direct [a private messaging feature] is huge and already something that marketers are using to connect with their customers on the platform. We want to make it easier [for businesses] if messages are coming through different channels to respond, provide customer service and connect with people in a one-on-one environment. We're going to continue to expand the tool set that's available there.

Johnson: With more advertisers using automatic placements, do you still see advertisers wanting to buy Instagram-only campaigns?

Squires: It's a mix. If a marketer has a full view into everything, then automatic placements is a great way to try and get the highest ROI. But there are marketers that want to run an Instagram-only campaign or have lifetime value information about their customers that Facebook doesn't have a view into.

It's not a one or the other but it's definitely a best practice that if you're clear about your business objective, cue up your creative and let the system find the highest ROI for you.