Facebook today announced that Instagram now has 300 million monthly active users. This has invited inevitable (unfavorable) comparisons to Twitter, which had 284 million MAUs at the end of last quarter. I wanted to talk about a couple of things in relation to those comparisons.
Facebook and Instagram
Firstly, I wrote a post a year ago which I titled “Instagram’s advertising problem” which was really about the challenge of serving relevant and timely ads, and the degree to which various services struggle to hit that sweet spot. Instagram’s core challenge as a standalone business was that it knew next to nothing about its users, especially before brands started being a big presence on the service. What’s becoming increasingly clear since then is that one of the biggest forms of synergy between Facebook and Instagram is the ability to use the data Facebook has on users to target Instagram ads. See this quote from the Wall Street Journal’s interview with Instagram CEO Kevin Systrom today:
We use Facebook to serve the ads to Instagram. Basically, we’re making it very clear that data is shared between the services under Facebook’s roof. Facebook helps us provide relevant ads to the users. You don’t want a 50-year-old male who’s interested in autos seeing an ad for a beauty-care product targeted at teens. If you ask users what they hate most, it’s not having relevant ads being served to them.
It’s also very clear that information doesn’t flow back the other way:
WSJ: Does my activity on Instagram affect the ads I see on Facebook?
Systrom: I don’t think we have plans for that right now.
That’s likely because there’s almost no useful information that could be sent back the other way, because Instagram activity provides almost no insight into user demographics or interests (except to the extent that users have explicitly followed brands). All this also raises an interesting question: to what extent do the two user bases overlap? Are the vast majority of Instagram users also Facebook users, who’ve built up enough of a profile there to provide targeted advertising on Instagram? For now, I think the answer is likely yes: many of the teenagers now swarming to Instagram likely had Facebook accounts already (even if they’re not using them as often), but what if future teenagers (or other Instagram adopters) skip the Facebook stage entirely, or never bother populating their Facebook profiles with enough material to effectively target ads?
Twitter and Instagram
So, on to that unfavorable comparison to Twitter. I actually want to talk about two things here: one is why Instagram is growing so much faster, and the other is addressing the idea that Twitter should have bought Instagram instead.
First, why is Instagram growing so much faster? I think the answer is that it basically mirror the network effects of Facebook itself, in that it’s built around a community of friends and family. It benefits hugely from the fact that once a critical mass of your friends joins, it becomes inevitable that you will join too, to avoid missing out. This is especially the case among what is (likely) one of Instagram’s strongest-growing demographics: teenagers. Twitter entirely misses out on this phenomenon, by being a platform that’s largely about connecting with people, brands, news sources and so on that you have no existing personal connection to. It also suffers from the fact that so much of its content is easily available to its famous “logged-out users”. Because it’s inherently a public platform, there’s no great benefit to being logged in (or even registered) for much of the content shared there.
As I’ve written about previously in various posts on Twitter (e.g. here, here and here – full archive here), Twitter’s focus seems to be on talking up the size of its existing audience, partly by expanding the definition of what that includes, but what it really needs to do is find ways to keep growing the core base. And it’ll do that only if it (a) lowers the barriers to entry (as I described in this piece), and (b) taps into those viral and network effects that true social networks enjoy.
Secondly, the issue of whether Twitter should have bought Instagram instead. Arguably, Instagram might have helped Twitter solve the very problem I’ve just been talking about: as a true social network, Instagram enjoys network effects Twitter doesn’t, and it could have both plugged a gap and served as a focal point for Twitter’s messaging and other efforts. Instead, it’s now trying to build those things around the core Twitter experience instead, and that’s going to be tough. So there are some good arguments for such a combination. But the biggest counter-argument goes back to the point I started with, which is that without Facebook, Instagram really had no way to monetize effectively, because it had no way to display timely, relevant ads.
With Facebook’s help, it now scores very highly on the relevancy side, because it can leverage Facebook’s data on its users where the two user bases overlap. Twitter, on the other hand, suffers from a very similar problem to Instagram itself: it knows something about its registered and logged-in users, though arguably not that much, but knows almost nothing on its own about the logged-out users. Instagram wouldn’t have helped with that, and without its own data on those users, and likely relatively small overlap between the two bases, it would have found it very difficult to effectively monetize Instagram. For all these reasons, though there is some logic behind a combination of Twitter and Instagram, it would have been enormously tough to justify financially for Twitter. I think it’s a much better fit for Facebook, but unfortunately that leaves Twitter struggling with the same old problems.