Of course Facebook's going to change Instagram

Social giant didn't overpay for photo-sharing app without plans to generate revenue

Somewhere there's a Facebook fanboy who actually takes at face value CEO Mark Zuckerberg's assurances regarding Instagram's independence now that the social networking giant has agreed to acquire the wildly popular photo-sharing app.

But most of us -- hopefully, at least -- are not so naive. Facebook isn't paying $1 billion to acquire a company ostensibly worth $500 million so it can not integrate it into Facebook's massive data-mining operation.

Facebook sees an opportunity here beyond merely adding more than 30 million users of Instagram to its social empire. It sees a way to leverage more contextualized data and content for advertisers. After all, isn't that Facebook's business model? (It sure isn't "Do whatever we can to allay the privacy fears of our members.")

And the truth is, Zuckerberg didn't make any promises in his Monday announcement posted to his 12.8 million Facebook followers:

"[W]e need to be mindful about keeping and building on Instagram's strengths and features rather than just trying to integrate everything into Facebook."

"We need to be mindful"? Now there's an ironclad guarantee!

"That's why we're committed to building and growing Instagram independently. Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people."

"That's why we're committed" sounds like a strong statement, but don't forget that, like any corporation, Facebook reserves the right to change its level of commitment at any time, much as it reserves the right to change to terms of its privacy rules.

"We think the fact that Instagram is connected to other services beyond Facebook is an important part of the experience. We plan on keeping features like the ability to post to other social networks, the ability to not share your Instagrams on Facebook if you want, and the ability to have followers and follow people separately from your friends on Facebook."

"We plan on," until we don't. Seriously, who could possibly think Facebook will house and sink resources into a free app that is totally separate from Facebook, an app that never has generated revenue, without requiring a return on its investment? Even if Facebook does allow Instagram accounts to be completely separate, the social networking giant will mine the data.

No doubt, the Instagram acquisition makes strategic sense for Facebook. The social giant is weak in mobile -- it admitted as much in its S-1 filing for May's expected initial public offering -- and Instagram is a huge mobile app, with more than 30 million users, with most based on Apple's iOS and a new Android app already attracting 1 million users.

But it's weak in mobile because it doesn't run mobile display ads (yet). From the S-1 under "risk factors":

Growth in use of Facebook through our mobile products, where we do not currently display ads, as a substitute for use on personal computers may negatively affect our revenue and financial results.


Our advertising revenue could be adversely affected by a number of other factors, including:

increased user access to and engagement with Facebook through our mobile products, where we do not currently directly generate meaningful revenue, particularly to the extent that mobile engagement is substituted for engagement with Facebook on personal computers where we monetize usage by displaying ads and other commercial content.

There's only one way to defuse these risk factors -- especially since, in buying Instagram, Facebook has all but guaranteed "increased user access to and engagement" via mobile -- and that's to monetize mobile use. Does anyone really believe Instagram -- Facebook's biggest purchase by far -- won't be part of that plan?

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