Facebook posts an ugly snapshot of Instagram's future
(Bloomberg Opinion) -- Mark Zuckerberg is starting to suck Facebook Inc.’s eponymous product dry as far as rapid growth is concerned. Next target: Instagram.
That might explain the departure of Instagram co-founders Kevin Systrom and Mike Krieger. Six years after Zuckerberg acquired their then 13-person startup for US$715 million, the photo-sharing app has become Facebook's most important source of growth. Zuckerberg has subsequently assumed a more hands-on role, which became a source of tension, according to my Bloomberg News colleague Sarah Frier.
In recent earnings calls, Facebook has emphasized its intent to secure more ad dollars from Instagram. That’s good news for investors, but it also poses a risk to the very reason for the success of Systrom and Krieger’s baby.
People are drifting away from Facebook in part because the quality of its content has declined. That’s not just down to too many users flooding the place, but also because much of the most recent growth in ad revenue has come from small- and medium-sized enterprises. As those companies pile in, they’ve stuffed the newsfeeds with spammier content.
Now Facebook wants to do similar with Insta, which it has been slower to milk for revenue. Its early corporate users tended to be big brands or smart startups with strong marketing savvy, meaning that the quality of ads is relatively high. Yet Facebook has launched recent initiatives encouraging SMEs to place ads in Instagram Stories, its answer to Snapchat. That’s a tricky path to tread. If Instagram too becomes chock-full of trashy ads, the user experience could suffer and people will move elsewhere again.
It’s a conundrum at the heart of Facebook’s business. It needs more advertisers to continue growing apace. But because of Facebook’s dependence on automation, the more ads you get, the spottier quality becomes – and the greater the likelihood of repulsing users.
Should Instagram experience such a slowdown, then WhatsApp is the next great hope for revenue growth. So far, only tentative steps to squeeze extra money from the messaging app have been taken in places like India. But its founder Jan Koum, a staunch defender of user privacy, also left in April, hinting at greater pressure from Facebook. WhatsApp has been building a team of data scientists over the past year, suggesting that it too is exploring ways to exploit user data to generate sales.
Instagram has some inherent advantages over Facebook as far as content is concerned. It’s harder to re-share content from others, and it’s not a forum for debate in the way Facebook is, meaning that it’s not as polarizing.
Yet Zuckerberg’s Facebook has to make sure it doesn’t become akin to a swarm of locusts, moving from platform to platform and turning each one to a husk.