Facebook and Instagram
April 10, 2012
The Twitterverse was full of disgust yesterday over the announcement that popular image-sharing service Instagram was purchased by Facebook for a cool $1 billion. Despite both companies offering assurances that Instagram will continue to be developed independently, there’s still potential cause for concern.
Let’s look at where Instagram stood before the buy-out: a popular service among the hipster elite that was, until recently, an iOS exclusive. Instagram was a distant competitor to Facebook as far as online picture sharing goes, but it was nonetheless one with a decent growth curve. The hasty adoption of the recently released Android client illustrated Instagram’s demand perfectly. But, Instagram had no monetization strategy outside of acquisition, and that’s a torch Facebook must now bare.
Facebook has nothing to gain from leaving Instagram as-is, because it leaves them with the same monetization problem Instagram had before the acquisition. With Facebook’s IPO looming ahead, their job is to make money, not buy cool startups because they pose as abstract threat years down the road. Surely, part of Facebook’s acquisition strategy was to mitigate attention loss from the Facebook app to Instagram, but that same strategy needs to account for driving users back to Facebook. That is to say, the value in Instagram isn’t in keeping the service separate from Facebook’s existing services, nor is it purely in absorbing the small fraction of online picture-sharing that Instagram has claim to. Rather, it’s driving as much traffic back to Facebook’s existing portfolio to as possible, and to enrich the overall Facebook experience.
Reading into the recent Facebook and Instagram company statements after the acquisition announcement, we can’t help but think that by “improving” Instagram, Facebook will do whatever it can to inject more Facebook functionality into the Instagram app, be that in the form of check-ins or targeted advertisement. Ultimately, Facebook’s goal will be to add Instagram’s functionality into the Facebook app proper, thereby minimizing a user’s need to use both apps.[^1] We wouldn’t be surprised if Facebook’s goal is to require Instagram users to have a Facebook account for logging into Instagram in the future, thus solidifying the integration between apps. Either way, Facebook’s emphasis will be on their core product, not in leaving Instagram as-is; Facebook bought Instagram for the data, and will undoubtedly use that data outside of the Instagram app. How they’ll leverage user photos in other areas should become evident in the coming months, but rest assured Facebook already has a monetization strategy for their Instagram acquisition, and that strategy will neatly tie in to their existing products.
Some critics are doubting Zuckerberg’s clear-headedness with the acquisition, and that he over-estimated Instagram’s worth. That’s partially true, considering Instagram was assessed at $500 million only a short time prior to the acquisition. But Facebook clearly saw not only Instagram’s growth potential, but also a successful mobile app built around sharing. You can argue that Facebook should have been able to build a reasonable competitor, but we all know how utterly crappy Facebook’s mobile apps have been to date. And, perhaps more importantly, there’s unseen value in the mindshare of Instagram. Despite all the kids swearing Instagram off because of the acquisition, how many will truly stop using their beloved social networking client? Even if Instagram loses a chunk of users due to the acquisition, those who remain loyal to Instagram will at minimum remain neutral to their new Facebook overlords, and in some ways, that’s a positive thing for a company that’s been ridiculed by the geek savvy for constantly shitting on user privacy.
Instagram is also a social network of a sort different from Facebook’s core offering, in that Facebook was built around reconnecting with old acquaintances and those in your real-world networks. Instagram’s photo sharing mechanism means users follow random individuals based purely on the aesthetic value of what they share, and that’s a very different beast from how Facebook has operated to date. Yet, it’s clearly a space Facebook wants to continue moving in, as it captures a networking angle that simply following friends, companies, and celebrities doesn’t.
The clear takeaway however is that Instagram will compliment Facebook, not the other way around. It may be too soon to jump from Instagram’s ship since we don’t know exactly how things will play out, but you’re fooling yourself to think the Instagram experience, sandboxed as it currently is, will remain intact.[^2] Fortunately, there are several options to replace Instagram, both in contained apps like PicPlz, as well as combination tools like Twitter and Hipstamatic;[^3] whatever disappointment we have in giving up Instagram doesn’t create a void we can’t fill.