Instagram is looking like a great acquisition. It had 30m users when Facebook (NASDAQ:FB) bought it in April 2012, and has now passed 150m, just 18 months later.
(The change in colour signifies the acquisition.)
This reminds everyone, naturally, of YouTube - again a product that has become far more popular since acquisition in late 2006 (this chart shows the only consistent data that seems to have been released).
There's a difference here, though. YouTube is the dominant online video sharing platform but Instagram is not remotely the dominant photo sharing platform on mobile. Facebook's latest disclosure is that 55m photos are shared a day on Instagram, and another 450m on Facebook itself. But 450m a day are also shared on Snapchat, and 400m on WhatsApp. And we don't know the numbers for Line, or WeChat, or the next half-dozen services to be launched that we haven't seen yet. Meanwhile Instagram has 55m monthly active users but WhatsApp has 350m and there are close to a dozen others with more than Instagram.
So as it turns out, Facebook did not solve the unbundling problem by buying Instagram - even in photos. It bought just one of many mobile social products, and not even the biggest.
All of these new services are driven by the fact that smartphones have characteristics that remove most of the defensive barriers that Facebook has on the desktop:
- The smartphone address book is a ready-made social graph that all apps can tap into
- The photo library is open to all apps
- Push notifications remove the need to check multiple sites
- Home screen icons are easier to switch between than different websites
The fluidity with which you can move between these apps seems to be breeding very fluid use cases. The original analysis was that these were unbundling Facebook in a semi-coherent way - most obviously, Instagram was taking photos, a core Facebook use case, and moving them to a different, specialised app. But it doesn't seem to be as clearly defined as that.
People aren't using Instagram for photos, WhatsApp for text, Line for stickers... they're using everything for everything. Instagram to tell people you're running late, WhatsApp to share holiday photos, Snapchat to make plans for the evening and so on. WhatsApp and Instagram are not in different categories - they're direct competitors for time and attention. Instagram, Snapchat, Line and all of the others are all poking away at different social behaviours and different options in the same communication space.
This shouldn't really be a surprise: we already have three social apps on our phones - voice, SMS and email, and we don't stick to a rigid set of use cases for each one. These new apps just add more options into the spectrum. That, of course, points strongly against consolidation into a single winner.
So buying Instagram certainly looks like a good trade - it would be worth a lot more if it was selling today. But as a strategic move, it's looking increasingly irrelevant. Is Facebook going to buy WhatsApp, Snapchat, Line, Kakao and the next ten that emerge as well? Sure, some of those will disappear, but it doesn't look like FB will crush the competitors the way it did on the desktop. On mobile, Facebook will be just one of many. Just maybe, Facebook might have been better off rethinking the core product instead of buying what turned out to be just one of a swarm of alternative services.
This, of course, prompts comparison with another (in)famous acquisition - Flickr's purchase by Yahoo (NASDAQ:YHOO). There was a period when AOL and Yahoo went around buying up lots of cool new web services as their portal model came under threat. They then generally mismanaged them, but that wasn't really the point. No matter how well they ran these acquisitions, they couldn't buy every great website that there was. Neither can Facebook.