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Facebook Doesn’t Own Instagram; They’re Competitors

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When Facebook (NASDAQ: FB  ) bought Instagram for nearly a cool billion dollars, the social-media world seemed to "like" the decision. However, nearly two years after the deal, Facebook still hasn't monetized this venture.

Even worse, it is increasingly looking like Instagram is becoming a competitor. A recent EU study on social media confirms this trend: UK teens aged 16-18 are embarrassed to be associated with Facebook and are moving to "more hip" social media sites -- including, you guessed it, Instagram.

This puts Facebook in a tough situation. Right now, they derive no direct benefit from Instagram's existence and are actually harmed by cannibalization as it grows. These are the hallmarks of a competitor, not a business unit.

Of course, this could change with the effective monetization of Instagram users. Compared to Facebook's monetization of over $4 per account, that number is currently $0 from Instagram. However, this is easier said than done, Instagram users have already pushed back against a change of terms in the past and seem to be more resistant to change than Facebook users.

In today's video, Jamal Carnette talks Facebook and Instagram.

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Jamal Carnette

After working at The Motley Fool, Jamal Carnette decided to try his hand at writing for a change. You can find him writing about technology, consumer goods, sports, and pontificating on any competitive advantage. His previous jobs include Mortgage Trainer, Financial Advisor, and Stockbroker. Jamal graduated from George Mason University with a bachelors of science in finance and is a CFA Level III candidate. Follow me for tech trends, info on consumer brands, and sports banter.

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11/25/2015 3:27 PM
FB $105.71 Down -0.03 -0.03%
Facebook CAPS Rating: ***