What Happened After Instagram’s Acquisition
A Story about Growth Mentality and Originality.
In 2012, Zuckerberg offered a billion dollar to Kevin Systrom, the founder of Instagram to acquire his media business. It was the most expensive acquisition in the world at that time and there were a lot of critics against Zuckerberg for its decision.
Instagram, started with an idea of photo sharing application. Their focus was actually more towards the product, i.e. camera filters and users interactions rather than developing a social network. They have faced various challenges including investment shortage, lack of technical experts in the media field and developing a profitable business model. Jack Dorsey, the founder of Twitter was an angel investor to Instagram and had offered Kevin to buyout instagram. Kevin rejected Jack because he was longing for the autonomy and there is not any apparent synergies that could drastically benefit both companies.
Mark saw Kevin’s rejection to Twitter and began to approach in a more sympathetic way to pitch Kevin with an ideology saying Kevin is able to do what he’s doing currently, Facebook will not interfere in addition you can have my capital and human resources if you needed them. So the buyout was successful and at the time Instagram had only 30 million subscribers with zero dollar revenue.
After the acquisition, Mark gave Kevin full autonomy for the first few years until 2016 to have the entire company ran by Kevin and gave him the title as the CEO of Instagram. A few other acquisitions have also been made, for instance, Whatsapp, Oculus VR etc. Facebook fueled its success by dominating competitions and growing its profit, however the mentality of growth has inevitable yet drastically hurt the brand and the culture of the firm. Which is led by Mark Zuckerberg himself.
The difference between Kevin’s Instagram and Mark’s Instagram is Kevin treats instagram as a product whereas Mark treats instagram as a business.
Before Facebook’s intervention at Instagram, Instagram was simple and engaging. There were not a lot of advertisements and business profiles, where all the contents are from people that you followed. There were not a lot of notifications of mutual friends and page suggestions, pretty people treat instagram as a place to see what are your friends up to rather than building a network. There were not a lot of social influencers (KOL) or paid promotion contents, where the platform was intended to be entertaining, not in a commercial settings.
In 2016, Facebook has seen the successes in Instagram as it has blown up and in executive meetings Mark brought up the term “Cannibalization” to Instagram, later on to Whatsapp. In fact, earlier in mid-2010s in fact Facebook’s active posts by individuals have substantially decreased due to the popularity in Instagram and Instagram has taken over as the most used photo-sharing social media platform. With an intention to “Focus back on the core business which is Facebook” because “a minute our customer spent on Facebook” is more profitable than “a minute spent on Instagram/Whatsapp”. The stakeholders and management team began to conflict and Mark overpowered the opposition and initiated changes to commercialize Instagram much differently than how Instagram was.
- Users are not longer able to see if the user has posted through Instagram from a Facebook post from the others
- A heavy amount of business profiles were incentivized and instagram ads penetrated user’s profile more often than before
- Facebook also inserted its brand into Instagram in order to cope with its fairly negative reputation towards public sentiment
Value Proposition Changes
In the past year or two, the management team for Instagram and Whatsapp have all quitted and replaced by the Facebook’s employee. From a strategy perspective, the overall prospect of the social media giant is not as bright as it used to be. Although during these times they have combatted with Snapchat with the introduction of instagram stories and momentum (disappearing) message functions, and introduced IGTV to include short films and mini-documentaries. Instagram development has changed ever since to be “more like Facebook” than develop originality.
Every user markets themselves like a brand and every brand markets themselves like a person.
The original purpose of Instagram is much more like Tiktok than Facebook, then after the acquisition Facebook has turned Instagram into a mall using user traffic to maximize profitability. As time passes by, the growth of Instagram is no longer fuelled by any distinguished feature from the application nor overall digital media growth, but Instagram’s largest driver is the network effect from its 1 billion network from the app itself and 2.6 billion current from Facebook.
Until Tiktok Kicks-in
Tiktok’s intervention is spectacular and further magnified by the lockdown due to Coronavirus. It does not have a really mature and apparent business model to generate a profit, but yet it is easy to navigate, fuelled by fresh contents and have minimal commercial contents — Just like the beginning of Youtube and Instagram.
Tiktok’s value proposition is much different than any other social media because its focus on customer experience in addition to its network has shortly made Tiktok the second most popular application with 800 million active user worldwide. Also it is also fair to say Tiktok users typically spend more time in Tiktok than on Facebook.
The current Tiktok is like Instagram in the very beginning but instead of displaying photos, Tiktok utilize video-sharing application. With elements like Youtube (Copyrighted Music Rule), Facebook (Content Sorting Algorithm), Tiktok is so technologically driven and have a competitive advantage over Facebook and Instagram. However, the primary purpose of Tiktok is for entertaining purpose instead of communication, therefore it is not quite ideal to compare Tiktok with Facebook in a apple-to-apple scale.
One of the biggest drivers of Silicon Valley is growth mentality. Yet that could also be the biggest nightmare for these companies as well. A strong growth mentality usually comes with a bunch of measurable goals to achieve, it helps business leaders to better identify problems and incentivize their employees to work hard. However, disruptive innovations do not result from a consistent improvements but by taking costly risks and explore new opportunities.
Facebook is a great example of exaggerated growth mentality because of Mark’s growth mentality, he is less receptive to ideas that could potentially reposition in Facebook in a better way but cost Facebook some profitability margins. Moving forward, Zuckerberg will only continue to expand their core competency and get to innovate by acquiring startups. The brand loses value and provides more opportunities for new entrants to compete.