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.

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