Is Instagram Direct a Redundant Feature for Facebook?

Facebook's (NASDAQ: FB  ) $1 billion purchase of Instagram last year perplexed me then, and it still perplexes me today.

When Facebook purchased Instagram last April, I thought that it could help the social network enhance its own photo sharing features and grow a larger user base, despite the exorbitant price tag. That didn't happen -- instead, Facebook allowed Instagram to remain an independent platform and retain its separate user base and apps.

In June, Instagram added 15-second long videos to its app. Again, I thought that this feature would somehow be integrated into Facebook, but it wasn't -- it was actually aimed at countering Vine's 6-second videos, rather than enhancing Facebook's comparatively dull video sharing platform.

On Dec. 12, Instagram introduced Instagram Direct -- a direct messaging system that would allow Apple (NASDAQ: AAPL  ) iOS and Google (NASDAQ: GOOGL  ) Android users to send text, photo, and video messages to each other privately.

Instagram Direct. Source: Instagram.com

Although the similarities with messaging apps such as Facebook Messenger, Whatsapp, and LINE are apparent, Instagram's messaging system is slightly different -- you have to start a conversation with a shared photo, and not a text message. Photos can be shared with up to 15 people or user-defined groups, and conversations only start once a friend replies. Just like Twitter (NYSE: TWTR  ) , only people you follow can send you photos and videos.

Instagram Direct isn't a complementary service to Facebook -- it's taking aim at Snapchat's popular network of self-destructing selfies and other competing messaging apps.

While these enhancements help Instagram remain competitive, they also appear redundant when compared to Facebook's features. After all, don't companies usually acquire other ones to achieve cost-saving synergies and eliminate redundancies?

Facebook and Instagram by the numbers

There are advantages of keeping Instagram separate from Facebook, however.

Over the past nine years, Facebook has evolved from a simple social networking site of status updates and photos into a cluttered maze of messaging, games, apps, sponsored posts, location-based services, and e-commerce. Instagram, by comparison, has kept things simple -- before the introduction of video and direct messaging this year, it had simply been a feed of filtered photos.

Instagram's user base is small compared to Facebook, it hasn't reported any revenue yet, but it has plenty of growth potential -- last December, Instagram only reported 15 million total users. Today, that number has soared ten-fold.

 

Daily active users

Monthly active users

2012 revenue

Facebook

728 million

1.19 billion

$5.1 billion

Instagram

75 million

150 million

$0

Source: The Verge, Facebook 3Q report.

Instagram's value comes from its brand. If Facebook had simply acquired Instagram, dissolved the company and integrated its filters and user base directly into Facebook, Instagram would have lost its appeal and users who preferred Instagram's simpler interface. Merging the two networks could also have been a technical nightmare.

However, Instagram must eventually generate ad revenue to become a worthy asset for Facebook.

In this regard, Instagram shares similar strengths with Facebook and Twitter. On these social networks, companies are no longer anonymous banner ads -- they become "friends" who can be followed and interacted with.

Burberry, which has 1.1 million followers on Instagram, is a master of impressing followers with trendy photos and videos of their new products. Companies use Facebook and Twitter to announce exclusive special deals, which attracts more followers and spreads brand awareness virally.

Burberry's Instagram account. Source: Instagram, author's screenshot.

It's an idea that Wall Street is enamored with, based on these forward projections.

 

Instagram

Facebook

Twitter

2014 ad revenue forecast

$340 million

$7.6 billion
(including Instagram)

$808 million

Source: Analyst estimates, eMarketer.

Let's not get ahead of ourselves, though.

A lot has to go right for Instagram, Facebook, and Twitter to hit those forecasts. Most importantly, video ads have to be proven as an effective advertising tool for both companies and consumers.

Is Instagram destined to become a mini-Facebook?

However, the thing that bothers me about Instagram is that it is losing its snapshot simplicity, which is one of its most attractive features.

In its bid to compete with Vine and Snapchat, Instagram is following the footsteps of Facebook -- with every new feature it adds, it moves one step closer to becoming a redundant, miniature clone of its parent company.

It's becoming increasingly clear that Facebook is faced with two choices -- let Instagram flourish as a separate brand, or eliminate these redundancies altogether. When Facebook acquired Instagram, CEO Mark Zuckerberg proclaimed that Facebook would be "committed to building and growing Instagram independently."

Yet throughout 2013, two key figures from Facebook -- Emily White and Peter Deng -- have joined Instagram.

White was Facebook's previous director of mobile partnerships, and joined Instagram as the new director of business operations in April. Deng was previously a top product manager at Facebook, where he led the redesign of Facebook's News Feed and Messenger. He joined Instagram in August as its first director of product.

Although White and Deng will still report to Instagram CEO Kevin Systrom, hiring two key figures from Facebook could help turn Instagram into a miniature Facebook as time goes on.

While Facebook asserts that it won't interfere with Systrom's plans for Instagram, the launch of Instagram Direct seems to indicate otherwise, considering that the announcement comes shortly after Facebook's failed $3 billion bid to buy Snapchat last month.

Stumbling down a slippery slope

Moreover, Instagram's decision to "start a direct chat with a photo" seems like an afterthought intended to distinguish Instagram Direct from Facebook Messenger. After all, Facebook already offers the ability to insert private photos into messages.

If Instagram continues along this path, it could tumble down a slippery slope where it starts to desperately bolt on other features that made Facebook popular, ruining the simplicity of its original app. What's worse, adding those new features won't help company accounts, photo ads, or video ads -- the three core sources of Instagram's future revenue growth.

A better option, in my opinion, would be to integrate Instagram features into Facebook, but not vice versa. Facebook's photo and video options leave a lot to be desired, so why not enhance them with Instagram's trademark filters instead?

Facebook could also allow photos to be cross-posted back to Instagram, since Instagram users already have the ability to cross-post back to Facebook and Twitter. There's no real need to turn Instagram into new mini-social network, especially when plenty of Instagram users already use Facebook.

A final thought

At this point, it's all speculation where Instagram will head next. These little new enhancements could be great for users and help Instagram remain competitive, but they could also break the original system.

What do you think, dear readers? Do you think that Instagram Direct was good move for Instagram and Facebook? Let me know in the comments section below!

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