MediaFile

Instagram’s Facebook filter

May 11, 2012

The startup had millions of users, but, from the beginning, just one customer.

The predominant way of interpreting Facebook’s billion-dollar purchase of Instagram, in light of the social-networking giant’s forthcoming IPO, is that Mark Zuckerberg had to pick up the photo-sharing app to boost his company’s mobile engagement. That would allow him to guard the mobile flank against incursions from Google, Twitter, and whatever other social-media tools might next arise.

That may be true – and it may even be the way Zuck thought about the deal when he swallowed hard and ponied up the purchase price. But that way of analyzing Facebook’s pickup, and the pickup of dozens of other startups, not just by Facebook but by Google, Twitter, LinkedIn and others, is probably not telling the whole story. Here’s a different theory, one that better describes the tech world that we, the users of the Internet, now inhabit: Instagram may have had millions of us as its users, but it was really built for just one customer: Facebook.

Silicon Valley, for too long, has confused the issue of what it means to be a user of a website, service or app, and what it means to be a customer of the app. Intuitively, you’d think they would be one and the same: The person using the app is the person consuming the app. But increasingly, apps are being made to grab the attention of the hegemonic companies in tech. Whatever it takes to get bought.

Sure, startup CEOs are careful to refer to their user bases as just that – users – but even when money changes hands, those users are cattle to be herded toward a cell on a venture capitalist’s spreadsheet, to help the VC decide whether to fund another pivot, engineering acquisition, rack of servers, whatever. Users are just another dart, basically, that startups have to hurl at the bull’s-eye and ensure success.

A colleague of mine tells a story: You can tell when a tractor was made to be purchased by a farmer, and you can tell when a tractor was made to be purchased by a corporation to be used by its employees. Tractors whose users are also the customers come equipped with every convenience, from a satellite radio to Wi-Fi to all the cupholders a farmer could dream of. They drive well, and their controls are intuitive, because that’s what the average tractor driver wants, and what the tractor competition provides. Tractors bought by companies, for earthmoving, rock breaking and the like, come equipped with nothing but a hard seat and a prayer. Employees – mere users – don’t get any say on the amenities, or lack thereof.

Those in the tech world who gawked at Instagram’s spartan app suite – no Android app (until recently), a barebones website, all of its focus deployed toward speed and social – were, in retrospect, mistaken in believing the company’s goals were to grow as fast as possible, period. Instagram was only after one thing: to grow as fast as possible on mobile. The iPhone, more than any other platform, owns the mobile app universe. And so rather than waste its energy, Instagram aimed at the beating heart of the mobile world and hit it right between the arteries, with its incredibly popular iPhone app.

Facebook, as Paul Ford recently argued in New York magazine, has something like a gigantic, impossible video camera recording what everyone is doing on the Web every moment of the day, every day. It could likely see, with its magic data video camera, more and more and more and more Instagram usage showing up across the Internet, on iPhones. Then Instagram released its Android app, getting 5 million downloads in six days. Instagram was for real, and no company was in a better position to know that faster than Facebook. What Instagram was selling, in other words, was a huge amount of Facebook engagement. That’s basically valuable to just one customer in the entire world. Yep. Zuck.

It’s easy to believe that Facebook can stay in control of the Web in perpetuity by acquiring tech’s prettiest young things. But remember that a decade ago, Google looked like the substrate of the Internet. Nearly everything about the way we surfed flowed through Google. Now, not so much. While Google is far from toppled, a tectonic shift has created new land masses in the ocean, where previously there was only misty horizon. Where Ford sees Facebook’s dominance, I wonder if the same kind of shift might not undermine Zuck’s company in a decade’s time, and whether it will come from some competitor that does not yet exist – or at least not in the way that Facebook would perceive as a threat.

This company will probably emulate Google’s promise to “do no evil” and fulfill Mark Zuckerberg’s pledge to make Facebook not just a company but “a mission.” We keep making the “end of history” mistake on the Internet – that everything today is the last thing of its kind that will ever be invented or even needed. It’s a strange affliction, given that the Internet is basically creative destruction writ large. The next bedrock of the Internet might indeed be a startup brewing in some college kid’s mind right now, but if I had to pick one company that was doing all of these things right now, it would be Apple.

When Apple disrupts an industry, as it did with music, and is poised to do with television, it’s with the intent of bringing its customers new value and making new customers out of people who want to use its products. When Apple made a product, at least during the Steve Jobs era, it was with the intent of giving customers something they would want and use. Apple didn’t have much trouble identifying either its ideal user or its intended customer – both were the turtlenecked guy in the CEO seat, who would gladly let everyone in the company know if they had failed to live up to the expectations that come from either of those overlapping roles.

The way social-media companies conduct themselves today has little to do with value creation for the millions of people who sign into their products every day – because those people are not the customers. They’re just part of the product. That has been the strength on which startups make their billions, but when startups don’t bother to make their users into customers, that strength can quickly become a weakness as competition and innovation give users options to change habits. See, for example, the Yahoo to Google to Facebook example, or the AOL to Hotmail to Gmail example.

Next time a new app has the tech ecosystem all aflutter and you, the user, find yourself inevitably presented with a pop-up prompt to authorize or deny access to your account (as with the newspaper social reader apps that took Facebook by storm but are now tanking, thanks to their creepy behavior), it might be worth taking a second to figure out if you-the-user are also you-the-customer, before you click either one of those buttons.

PHOTO: A photo illustration shows the applications Facebook and Instagram on the screen of an iPhone in Zagreb, April 9, 2012. REUTERS/Antonio Bronic

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/