Does Facebook need to directly monetise Instagram?

As web based companies expand beyond their original remit is there a need to directly monetise all aspects of the business or can knowledge gained in one area be applied elsewhere to enhance performance?

Money Money MoneyFacebook's acquisition of Instagram has a partial similarity to the launch of Google+ in that they are both social properties outside of the core business which can be used for data collection

Google and Facebook are both in the information business but their primary business gathers data in different ways: Google via search and Facebook via user-generated/shared content and relationships.

Google launched Plus to utilise the social model of data collection. User content, shares, +1s all help to flesh out the social graph and when linked to the core business of search give Google a much better picture of out likes and interests and real-time trends.

Facebook has one of the largest data collection models going with such a huge range of data being freely offered up by its members. The only problem is that the data is such an amalgam that, perhaps, signal can get lost in the noise despite some of the most complex algorithms around. Instagram offers a different kind of social graph and, as it is more focused, is a good counterpoint to the main Facebook graph.

Monetisation

Google stated that there was immediate plan to directly monetise Plus - there is no need to. The social layer combines signals from right across the Google ecosystem as well as externally due to the +1 button enhancing the core data generated by Search. By using all of this data (and now with the single privacy policy) Google is far better able to target us with relevant advertising in all the locations it has historically done so without having to introduce further ads on the Plus site itself.

Does Facebook need to directly monetise Instagram?

It is widely accepted that mobile is an under utilised resource when it comes to Facebook making a buck but is Instagram the right place to do it? The application is a perfect example of a clean, simple mobile application and its users love it for this simplicity. Does Facebook want to ruin that? Most likely not.

Just as with Google+ would Facebook be able to gain enough data to better target advertising on the website without needing to resort to mobile or, as I suggested, would it make more sense to use the different social graphs both combined for an holistic picture and independently for "per platform" ad targeting based on our use on that platform?

Is this all made irrelevant by the IPO because of which Facebook may feel pressured to directly monetise mobile anyway?

What are your thoughts?

Why not discuss this on Google+ here.

Image by Jeremy Brooks

Does Facebook need to directly monetise Instagram?

Is Pinterest a Facebook competitor?

Facebook's acquisition of Instagram raises more questions than a simple "what's in it for Facebook" and could potentially alter online photo sharing for good.

Pinterest v FacebookIn a post on Forbes, David Coursey argues that Instagram is Facebook's Pinterest killer. He is "very aware that many will disagree with this analysis" and I have seen a number do exactly this but is Pinterest really a Facebook competitor.

It is now.

By acquiring Instagram Facebook has made Pinterest a competitor as well as the likes of flickr and Google+, in fact anywhere users share a lot of pictures. Facebook has effectively said it wants to be the major player in photo sharing.

At first glance the Forbes article seems a bit fanciful and can be accused of overplaying Pinterest's status but when you consider it has recently been referred to as the third largest "social network" and Facebook has acquired Instagram to better facilitate it "building the best experience for sharing photos" it's obvious to see that Facebook is at least a little concerned about this upstart.

Pinterest is not a true social competitor along the lines of Google+ as it has a significantly smaller remit but, for those Facebook users who predominantly share photos, there is an obvious temptation to try the "next big thing" especially considering the buzz that Pinterest has been generating lately.

One key area where I disagree with David is that I don't believe Facebook would be best served by creating a new service with Pinterest type boards. As I posted yesterday, it makes more sense to hook into Interest Lists as this will enhance their functionality and give some people a reason to use lists where they might not have done so before. There is no reason search results could not be presented in a board-like fashion but this should not be the basis for any integration of Instragram in to Facebook.

Mobile

With its IPO looming Facebook must ensure it has multiple revenue streams to justify its incredible valuation but is currently missing out on the whole mobile arena. Pinterest has come under fire for its affiliate use and trialling of Skimlinks (which has been described as a test and not a service plan) so there is potential for Facebook to potentially capture the market before the competition by leveraging the Instagram application on iPhone and Android.

Combining its existing social graph data with the new photo-specific relationship information from Instagram gives Facebook a great basis for ad targeting in a way that goes beyond the norm. Not only could advertisements be targeted based on interests and relationships but also on a per platform basis as our social graph will most likely differ in a task specific environment such as photography.

A  gamble?

Whether Facebook makes a reasonable return on its investment remains to be seen but there is no denying it has placed itself in a strong position in relation to the competition with regards to online photo sharing.

Is Pinterest a Facebook competitor?

What can Facebook gain by buying Instagram?

Instagram logoAs soon as I heard the news that Facebook had agreed to acquire Instagram my first reaction, probably like many others, was "oh no" but the news that the company plans to keep it independent was a welcome relief.

So, if the Instagram functionality is not going to be gobbled up by the ever hungry social giant what does Facebook stand to gain?

A testing time

Despite massive usage statistics there has been a recent groundswell of discontent amongst certain quarters. While there had previously been no alternative perhaps an element of complacency crept in but, since the arrival of Google+ (probably more because of its feature set and potential captive audience) on the social scene, the has been an uptick in activity to fend off the competition before it can establish a foothold.

Facebook is not concerned about competing with Google on a social level per se but any significant shift of its users affects the bottom line: advertising.

On board

The Instagram brand is huge and, now that it has finally spread to Android, has a massive potential user base. It is not in Facebook's interests to dissolve the service and risk upsetting - and even alienating - a lot of people considering the rumblings mentioned above. Instead, Facebook must gather as many strings to its bow as possible in order to retain existing users and attract new ones now that growth is reported to be slowing.

Although this isn't obviously an acquihire there is no doubt that the addition of Instagram's staff to the Facebook team will provide a different perspective on sharing - something which the larger company is keen for us all to do with everything.

Friends with benefits

There are a few areas that the social network can immediately benefit from a close relationship with the Instagram application but care must be taken.

One obvious move would be to make Facebook the default means of sign up but that would most likely be deemed a step too far by users. Linking accounts to Facebook could, however, be heavily pushed.

Mark Zuckerberg has announced the intention to extend the reach of the "app and brand" - what better way to extend the reach of a social product than by linking it to the largest social network on the planet. By hooking in to such a large portion of the population Instagram (or at least pictures taken with it) is immediately placed front and centre for hundreds of millions of users.

While the acquisition of Instagram is being sold as an extension to "building the best experience for sharing photos" we cannot deny it is an ideal opportunity to enhance Facebook's position in this area and better compete against the likes of Flickr and Google+.

Interests

As I mentioned previously, Facebook is looking to extend its reach beyond the simple friend to friend relationship and building a solid and widespread interest graph is a major step forward.

Instagram provides tag support already but this can be linked to interest lists. Combined with the talk of a search product from Facebook and you have a discovery network to rival both Google's social search and Twitter's discover tab which is in its infancy but due to grow enormously in scope and influence if my suspicions are correct.

Facebook has no need to build a full search engine as the indexing of external content is crowd-sourced to its users with likes and frictionless sharing. The acquisition of Instagram is yet another way to achieve this.

What can Facebook gain by buying Instagram?