What Facebook will do with Instagram

Posted on April 9, 2012

Facebook’s purchase of Instagram is certainly a great accomplishment for the guys behind this application. Their business model of building audience rather than profits has certainly paid off for them.

The big question now, is what is Facebook going to do with Instagram? Here are 5 outcomes that we believe may happen:-

1.Do nothing – they can continue to let Instagram be run as it has been, just happy that it is within the Facebook stable rather than with a potential competitor. I doubt Facebook will do this as there is a lot of potential upside for facebook in integrating Instagram’s technology and social network.

2.Integrate fully into Facebook – this would be akin to closing down Instagram. In the short term, this is unlikely as it would create a rush over to competitors, yet in the long term this is the most likely scenario. There will be other stages before this happens, with the probable time-span being is about 2.5 to 3 years.

3.Accelerate Facebook Mobile – in many ways, Facebook on mobile today is awful. It’s slow, breaks often and is missing functionality. On mobile the number two use case is to post photographs from the device into the Facebook timeline, so it makes sense if Facebook wants to raise its mobile game, to continue to develop this area. Instagram has really developed an area of expertise here. Hence through the purchase of Instagram, Facebook has gained the expertise to accelerate its mobile functionality, making sure most photos are posted through a Facebook owned application.

4.Expand Facebook Publishing into Other Networks – What we may see is an increasing approachment of Facebook mobile services into Instagram’s social network. This can be a great test of how Facebook status updates can be injected into different social networks and how to blend them.

5.Monetization – Instagram had no business model to monetize its audience, but all businesses need to be profitable to survive. Facebook has expertise here, so they will undoubtedly monetize Instagram through the additional of advertising and the sale of aggregated use data. Note that Facebook still has to monetize its own mobile application, so this may be some time off in the future, but it does solve the long term question of how Instagram will make money.

This is a great deal for Instagram. In the short term the service will continue, the Instagram team will get backup from Facebook and will be able to further develop and scale the product.

The only losers over the medium term will be Instagram users that don’t want to be on Facebook; as the two social networks can be expected to be combined.