The short- and long-term impacts of Instagram are making Facebook executives more nervous. The photo-sharing startup has been doubling its user base every three months since they launched six months ago! Launched in October 2010, Instagram had approximately 5-10 million users by February 2012, and its rapid growth has raised alarms within the social media giant. Executives immediately began talking about the strategic and financial wisdom of acquiring Instagram. They worry that Instagram’s success would jeopardize any chance of Facebook’s continued reign in the social networking arena.
The urgency surrounding Instagram’s rise is underscored by its ability to attract a diverse user demographic, including casual users and tech-savvy individuals. The app hit 2 million users in just four months since its launch. Now users are constantly sharing their creativity, uploading 30,000 photos a day! Facebook’s own executives understand that if the current growth rate continues, Instagram will soon become a serious threat.
Even Mark Zuckerberg, co-founder and CEO of Facebook, understood what an immediate danger that Instagram was. He detailed his concerns in a chain of internal emails. He noted that “if Instagram continues to kick ass on mobile, or if Google buys them, then over the next few years they could easily add pieces of their service that copy what we’re doing now.” Zuckerberg had already hinted at the threat that Instagram’s new and youthful user base presents to Facebook’s core business.
Private Facebook discussions leaked to the public show that Facebook is considering an acquisition of Instagram to avoid competing against it. As recently as February 2012, Zuckerberg was casting doubt on Facebook’s original plan. He noted that consumers would rather print high quality photos and display them outside of the platform and called for Snap to double down and spend big on the concept. This may be why Instagram’s draw is more than just its beautiful, singular commitment to photography. No, it’s not yet another clone of Facebook.
Instagram post-acquisition, deliberations over this acquisition focused on what Instagram should be like post-acquisition. Zuckerberg suggested a strategy where they would keep Instagram operational without adding new features, thereby preventing disruption while allowing Facebook to integrate Instagram’s functionalities into its own products. “I think what we’d do is keep their product running and just not add more features to it,” he proposed, indicating a strategy of prioritizing Facebook’s core products over Instagram’s independent development.
Maybe most importantly, former Facebook VP of Product Samuel W. Lessin joined the conversation in support of acquisitions. He said he was a vigorous advocate for buying highly successful platforms such as Instagram. He argues that Facebook should focus on preventing talented engineering teams from these companies and reorienting Facebook to beat them at their own game. “I actually think that there is a serious argument to be made that we should buy Path, Pinterest, Instagram, Evernote, and whomever else we really admire/are doing great things right now,” he said.
Zuckerberg went on to describe the very competitive environment, stressing how critical the moment is. He noted that each passing month without decisive action could translate into considerable growth for Instagram: “literally every couple of months that we waste translates to a double in their growth and a harder position for us to work our way out of.”
The internal emails do indicate that Facebook has been preoccupied by Instagram’s ascent in mobile photo sharing. Chris Cox, Facebook’s chief product officer, highlighted a remarkable growth rate of mobile uploads on the network. This recent surge is further, indisputable evidence of Instagram’s increasing power and impact. “The photos team is now focused almost exclusively on a new mobile photo app as we gawk at Instagram’s simple photo-sharing app taking off,” he remarked.
To combat this strategy, Facebook has explored creating its own short-form app to compete directly with TikTok and Instagram. Executives have acknowledged that replicating Instagram’s successful features could help retain users who might otherwise migrate to the photo-sharing platform.
In light of these developments, Facebook executives are aware that the U.S. Federal Trade Commission (FTC) could challenge any acquisition efforts. Should the FTC come out on top in its investigation, it could force Instagram to divest elements of its operations. This would go a long way towards ensuring regulatory compliance. This creates a second layer of complexity to Facebook’s decision-making process about whether or not to pursue the acquisition.
As Instagram continues to attract users at an unprecedented rate, Facebook remains vigilant about its implications for its business structure and competitive strategy. The growing popularity of Instagram has prompted Facebook to focus on enhancing its own product offerings while considering how to potentially integrate aspects of Instagram’s success into its existing framework.
