With Snapchat reportedly preparing to go public as early as the first quarter of next year, it's a good time to take a closer look at Facebook's (NASDAQ:FB) Instagram -- a social network similar to Snapchat. After all, many Facebook investors may want to get a better understanding of whether Instagram looks prepared to stand its own against the younger photo- and video-messaging network.
Instagram has been on quite a tear recently. But much of its recent success in boosting engagement is interestingly simply a byproduct of blatantly copying Snapchat's most successful feature. This poses an interesting question: With one of Instagram's biggest wins in 2016 derived from cloning Snapchat's bread and butter, is Instagram's rapid user growth sustainable in a publicly traded Snapchat era?
How Instagram copied Snapchat
In case you missed it, here's how Facebook's Instagram directly duplicated Snapchat's key feature.
In August, Instagram launched a major extension of Snapchat's core feature, called Stories. Perhaps in an effort to emphasize the exactness with which Instagram copied Snapchat, Instagram named the imitation Stories.
Snapchat's Stories, which arguably played an integral role in the service's rapidly rising popularity, enables users to compile photos and videos throughout the day into one segment to be viewed for 24 hours. Instagram's Stories, which can be accessed in a secondary feed, does the exact same thing.
Instagram isn't ignorant of the fact that its Stories feature is a near carbon copy of Snapchat. Instagram co-founder and CEO Kevin Systrom acknowledged the similarities in an interview with Casey Newton of The Verge:
[Systrom] credits Snapchat for developing the stories format. But he says it was always bound to surface in other apps. "My thesis is a story is a slideshow format," Systrom said in an interview with The Verge. "Just like when Facebook invented the [News] Feed, and every social product was like, 'That's an innovation, how do we adapt that to our network?' You're going to see stories pop up in other networks over time, because it's one of the best ways to show visual information in chronological order."
But it's not just the underlying idea of Snapchat's Stories that Instagram copied. Even the ways users interact with each services' Stories -- from recording video to adding text, drawing on the screen, inserting emojis, adding filters, and saving, publishing, and watching stories -- are nearly indistinguishable.
A catalyst for Instagram -- for now
There's no doubt Instagram's addition of Stories has been a boon for the service. Facebook acknowledged its significant impact during the company's most recent earnings call, when it acknowledged that the feature already has 100 million daily active users -- a third of its total daily active users.
"[W]e're really excited about the engagement with the product and how it's growing across the board," said Facebook Chief Operating Officer Sheryl Sandberg during the social network's third-quarter earnings call.
Instagram's success with Stories highlights both positive and negative narratives about the social network.
First, it emphasizes the power of the service's network effect. With over 500 million monthly active users and over 300 million daily active users, Instagram can instantly derive value from new product features -- even if they mirror other features on younger, smaller social networks such as Snapchat.
On the other hand, however, Instagram's move to copy Snapchat also puts the spotlight on the effectiveness of Snapchat's core feature -- highlighting the younger service's prowess in launching a platform that resonates with users. If Snapchat continues to lead the way with inventing new mediums and methods for communication, Instagram risks losing some of its users to Instagram.
With Facebook's Instagram well into the monetization phase, Facebook investors may be hoping the service will have a more material impact on the company's overall results in the future. But for Instagram to keep up its growth, the social network will need to do a better job of staying ahead of Snapchat's inventiveness.