Sunday , January 17 2021

Instagram would be better off without Facebook

For years, critics have argued that Facebook’s acquisition of Instagram was a missed opportunity to rein in the company. But now, they’ll have the chance to actually undo it. On Wednesday afternoon, the Federal Trade Commission joined with 48 state attorneys general to call for a court-ordered divestiture of Instagram and WhatsApp — essentially, forcing Facebook to undo both acquisitions and spin them back into independent companies.

Regulators are still a long way from making that happen, but for the first time, it’s a possibility that Facebook can’t ignore. And for Instagram users, it raises a question that’s both alarming and tantalizing: what would Instagram look like without Facebook?

In the years since the 2012 acquisition, Instagram has benefited hugely from its relationship with Facebook, gaining massive scale and freeing itself from the pressure to achieve profitability. Even now, Facebook’s support is crucial to Instagram’s aggressive product development cycle and low-profile navigation of content moderation challenges. If regulators succeed, Instagram would have to build much of that from scratch.

At the same time, there are reasons to think Instagram might be better off without Facebook’s baggage and might actually thrive outside the Menlo Park bubble. The Facebook name and tie mean an association with a chaotic mess of a platform and a branding nightmare. Every day Instagram stays within the Facebook family is another where it’s at risk for user backlash because of its parent company’s actions. Without that headache, Instagram could focus on what made it a popular app in the first place.

Less than 24 hours after the cases were announced, Facebook has yet to mount its full defense against the antitrust lawsuits. But in a blog post yesterday, the company’s general counsel gave an early preview of its case, arguing a spinoff would be both unfair and unfeasible. “No American antitrust enforcer has ever brought a case like this before, and for good reason,” wrote general counsel Jennifer Newstead. “The FTC and states stood by for years while Facebook invested billions of dollars and millions of hours to make Instagram and WhatsApp into the apps that users enjoy today.”

But peeling apart a conglomerate isn’t quite as difficult as Newstead makes it sound. Companies do it all the time when they see profit in it, whether it’s Hewlett-Packard’s spinoff of its enterprise business in 2017 or IAC’s spinoff of Match Group earlier this year. Of course, it’s different when it’s mandated by the government, but even that has a fairly recent precedent in the Bell breakup of the ‘80s.

After eight years of corporate integration, a spinoff of Instagram would surely be difficult. Facebook bought Instagram for $1 billion in 2012 during a quainter time for both companies, and since then, Facebook has attempted to tightly integrate the two apps. From the onset, it boosted Instagram’s visibility by tagging photos posted to Facebook from Instagram with a link to the app and prompted people to follow their Facebook friends on Instagram.

“Instagram was easier to buy than to build because once a network takes off, there are few reasons to join a smaller one,” writes Sarah Frier in her book No Filter: The Inside Story of Instagram. “It becomes part of the infrastructure of society.”

Facebook also backed the company financially and shared its ad technology to help it actually make money, which Instagram wasn’t doing prior to the acquisition. But even though Facebook eventually ended its promotional support, its network effects already took hold: Instagram now has 1 billion users and ads all over the place. In the most important areas, Facebook’s work is already done. If Instagram spun off now, those crucial changes would remain in place.

The remaining integrations with Facebook seemingly work more for Facebook’s own good than Instagram’s. In recent years, Facebook has tried even harder to link the two apps, allowing users to cross-post their content across both Facebook and Instagram. Facebook Messenger is now available through Instagram, tying the platforms together in a single, unified messaging system. But for Instagram users, those integrations mostly serve to make Facebook that much more inescapable.

It’s these tight ties that reportedly pushed Instagram co-founders Kevin Systrom and Mike Krieger to resign. Both executives quit after Facebook reportedly revoked its growth support and tested new designs and features while Systrom was away on paternity leave, including a hamburger menu and location tracking.

The Messenger integration is the most obvious place where users might be disadvantaged — people on Facebook wouldn’t be able to message a friend who’s on Instagram and vice versa — but that feature is fairly recent and only intermittently visible to users. Before now, users seemed to be fine with siloing off their respective platform friends, so it’s hard to argue it would be traumatic to put the silos back in place.

The biggest question is whether Instagram could survive without Facebook’s money. Facebook has never broken out Instagram’s financials, so we have no official idea whether the platform is profitable on its own. However, Bloomberg wrote early this year that Instagram generated more than a quarter of Facebook’s revenue in 2019, or about $20 billion from advertising. That’s obviously significant and more than most social competitors, like Snap, bring in on their own. We don’t know Instagram’s independent operating costs, but with $20 billion in only advertising revenue, it’s easy to imagine the team could still manage to profit while developing new products.

One area Instagram could struggle without Facebook is its burgeoning commerce business. This is an area where the Facebook infrastructure certainly helps Instagram and also where the company would have to invest. Right now, Facebook Pay allows Instagram users to buy products directly from the platform. Facebook doesn’t license Facebook Pay out to third-party apps yet, so Instagram would have to either continue a relationship with PayPal, which it also already uses for some payment processing, or build its own payment technology to encourage people to keep buying from the app. Instagram currently isn’t making money off transactions — selling fees have been waived for this year — but shopping revenue would become critical to growing Instagram’s business. Already, though, Instagram has a solid start on commerce that it could likely continue without Facebook’s help.

Of course, the reason advertisers and shops look to buy space on Instagram is its ability to target users with products and ads that most appeal to them. Much of that data is brought in through Facebook, which would be a major loss for both Facebook and Instagram and could reduce how much both platforms know about their users. Instagram might not be able to charge as much for ads without that precise targeting, but it still has a massive user base that brands would want to reach.

The biggest loss to Instagram if it spun off would be Facebook’s moderation investments. For all its blunders, Facebook has invested an enormous amount in moderation policy and enforcement, from its unprecedented Oversight Board to the small army of international moderators hired in recent years. And while Facebook has taken the blame for most of the failures, Instagram has benefited from the response, able to implement premade policy and take down content after it’s been flagged on the larger platform. After a spinoff, Instagram would have to build its own system from scratch, a daunting task for even the most successful platforms.

But despite that significant hurdle, Facebook ownership feels like more of a liability than an asset. The platform is a moderation mess that’s spurred local genocide, influenced elections, and polarized the world. Instagram has, miraculously, avoided most of this blowback, although misinformation and conspiracy theories still thrive on the platform. Its lack of groups and a recommendation algorithm that doesn’t thrust fake news stories in front of users, however, have helped it dodge the worst of Facebook’s problems. If separated, Instagram could rid itself of Facebook’s issues entirely.

Instagram has become the go-to app for many people, sometimes replacing their use of Facebook. Under Facebook’s guidance, the app’s become more feature-packed with more formats than ever. It’s no longer just a photo app. But for the users who rely on Instagram to promote their business or reach new audiences, they might prefer if Facebook had nothing to do with the app at all. Instagram could exist on its own, untainted by Facebook’s problems, and become, again, an independent place online where people can truly connect with the people and things they care about.

This Article was first published on theverge.com

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