Date
19 October 2018
Following the departure of its founders, photo-sharing platform Instagram could see enhanced monetization efforts from its corporate parent. Photo: Bloomberg
Following the departure of its founders, photo-sharing platform Instagram could see enhanced monetization efforts from its corporate parent. Photo: Bloomberg

What lies in store for Instagram after exit of the founders?

Six years after selling their startup to Facebook, Instagram’s founders have announced their departures from the company, setting off speculation in the tech world as to what might have prompted the exits and what could now lie in store for the photo-sharing platform. 

Kevin Systrom and Mike Krieger, who launched Instagram in 2010 before selling it to Facebook two years later in a US$1 billion deal, said this week that they are quitting the firm they helped create.

In a blog post on Monday, Systrom wrote that he and Krieger are leaving Instagram as they seek to explore “our curiosity and creativity again”.

Beyond that, there was no explanation for what led the duo to break away from their firm where they were holding top posts.

Systrom had been serving as the CEO, while Krieger was the chief technical officer.

The sudden resignations, not surprisingly, fueled suspicions that Systrom and Krieger were calling it quits because of tensions between them and Facebook founder and CEO Mark Zuckerberg.

Instagram was promised autonomy at the time of its takeover, allowing the founders to steer the company as they see fit even after its acquisition by Facebook in 2012.

Observers believe that of late, the autonomy was getting eroded as Facebook seeks tighter grip on the unit, which boasts a billion monthly active users.

The bid for stronger control comes as Facebook eyes enhanced monetization of Instagram, which has become popular with younger users, the demographic that most advertisers are interested in. 

Instagram can take on a bigger role in driving the group revenues, especially given the fact that the core Facebook platform is witnessing stagnation in some key markets. 

Facebook, analysts believe, wants Instagram to pursue a more advertising-driven business model, leveraging its fast-growing young-user numbers.

Instagram is coming into bigger play also because the photo-sharing site was largely untouched by the recent scandals — on issues such as data privacy, misinformation and elections-related messaging by foreign entities — surrounding its parent company.

As Facebook seeks to enhance Instagram monetization to make up for shortcomings elsewhere, and also tries to integrate the unit more closely into the parent’s overall business, it is likely that Instagram’s founders were not too happy with the business direction and erosion of operational autonomy.

Hence, the parting of ways. 

Facebook’s Zuckerberg does seem to be having a problem in retaining talents in the entities his group acquires. Early this year, WhatsApp founder Jan Koum left the company he launched, four years after he sold his firm to Facebook in 2014.

From a business perspective, the founders of a company could be difficult to work with the buyer as there could be divergence of interests among the two parties.

The founders would have their own philosophy and goals for their entity, while the buyer may just be interested in monetizing the acquired operation in order to recoup the investment and make money. 

Media reports suggest that Instagram’s founders were not happy with Zuckerberg’s involvement in the day-to-day operation of the unit, and that there were growing tensions between the two sides.

Zuckerberg, it is said, wants to deepen integration of Instagram with the group’s various apps and the flagship Facebook platform, which has seen its user growth slow in the wake of data privacy and other scandals.

The Facebook chief would do well to bear some things in mind as he pursues his business plans.

The success of Instagram under the ownership of Facebook in the past six years was mainly due to its independence from the team that was running Facebook. Instagram’s founders kept tight control of the firm even after selling the startup to Facebook.

In recent years, Instagram followed the “less is more” principle in running the world’s No. 1 photo sharing portal, while Facebook has been struggling to find a balance as to its role — whether it should be a pure social platform that helps users interact with their friends, or a social applications hub for publishers and game developers to host their products on the platform to reach out to more consumers.

While Facebook faces questions over its function, Instagram has continued to be a unique platform designed for photo sharing, even though it has added new features to enable users to share video content as well as to have a live video on the app to interact with other users, just like what Snapchat has done.

In June this year, Instagram announced that it has reached one billion monthly active users. The service maintains a 5 percent growth rate per quarter, beating both Facebook and Snapchat on that metric and making it fastest growing social media service.

The more the user numbers, the higher the advertising revenue potential. According to an estimate from eMarketer, Instagram will generate US$5.48 billion in US ad revenue in 2018, up 70 percent from last year. The research firm noted that Instagram makes up 28.2 percent of Facebook’s mobile ad revenue.

Now, with the departures of the founders, the efforts to squeeze more revenue out of Instagram will only get stronger. 

With Systrom and Krieger out of the picture, Zuckerberg will have room to get involved more deeply in the Instagram operations and steer the business in line with Facebook’s broader group targets.

Instagram, in fact, has been changing in the past few years in a bid to generate more ad revenue. For example, the platform added algorithms that altered the dynamic time sequence of posts as the company sought to distribute content to users based on their perceived reading habits.

Such algorithms have been drawing criticism from the public as they were seen as a Facebook attempt to accord itself the right to decide what users will read.

Facebook will no doubt seek to leverage the unit’s user base to boost IGTV, an Instagram video app vertical designed mainly for smartphones, to lure advertisers and compete with YouTube in the market.

On this, as well as other potential moves, the social media giant would do well to tread carefully, making sure that revenues are enhanced without sacrificing the core appeal of Instagram or antagonizing users with too many commercial elements.

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RC

EJ Insight writer

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