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Facebook Might Unbundle Instagram Messaging

By Evan Niu, CFA - Updated Dec 8, 2017 at 2:24PM

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Instagram Direct is the social network's latest riff on Snapchat.

Just when it seemed like Facebook (META 0.15%) was slowly walking back from its unbundling strategy, the world's largest social network may be looking to unbundle a significant service. Except we're not talking about Facebook directly: The company is testing out unbundling messages in Instagram. The new stand-alone app for Instagram messaging is called Direct, and is launching today in a handful of smaller markets (Chile, Israel, Italy, Portugal, Turkey, and Uruguay). Facebook often tests new ideas in smaller markets to gather data before potentially rolling out changes to its larger, core markets.

Instagram believes messaging experiences are best delivered via a stand-alone app instead of within a larger app, mostly echoing CEO Mark Zuckerberg's sentiments from a few years back that "there's a big premium on creating single-purpose, first-class experiences" in mobile. Instagram direct messaging now has 375 million monthly active users (MAUs), according to The Verge.

Instagram on iOS and Android

Image source: Instagram.

Another riff on Snapchat

"We want Instagram to be a place for all of your moments, and private sharing with close friends is an important part of that," Instagram product manager Hemal Shah told The Verge. "Direct has grown within Instagram over the past four years, but we can make it even better if it stands on its own. We can push the boundaries to create the fastest and most creative space for private sharing when Direct is a camera-first, stand-alone app."

To date, Instagram Stories has been Facebook's most successful effort to replicate Snap's (SNAP 6.10%) Snapchat and its Stories feature. Instagram Stories now has 300 million daily active users (DAUs), well above the 178 million DAUs that Snap finished the third quarter with. Instagram Direct will borrow another page out of Snapchat's playbook: It will open directly to the camera first in order to encourage sharing.

Snapchat considers itself more of a photo/video messaging service as opposed to a photo/video sharing service. Instead of publicly broadcasting photos and videos, Snapchatters often send content directly to specific users. It's a subtle distinction, but meaningful considering Snapchat's popularity. In other words, Direct represents yet another effort to replicate Snapchat and bring some of that service's features to Instagrammers (if Instagram decides to roll out Direct more broadly, that is).

Direct would be Facebook's third messaging service

It's useful to remember that Instagram operates as an independent entity under Facebook's corporate umbrella, so the team has the autonomy to pursue whatever strategies it sees fit. That helps explain why Instagram is considering unbundling such a significant part of its experience while Facebook's unbundling strategy appears to be up in the air.

However, there's a risk that Facebook ends up creating too many messaging services with overlapping features that have the potential to dilute the brand  (Direct would be Facebook's third messaging service, in addition to Messenger and WhatsApp). One search giant in particular is notorious for offering way too many separate messaging services with no cohesive strategy. Direct has some potential to be a successful stand-alone app that offers a better stand-alone messaging experience, although some user backlash and friction could reasonably be expected, like what Facebook experienced when it unbundled Messenger.

Let's see how the test plays out.

Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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