/// Facebook CFO calls Instagram a ‘formidable competitor’
Even as Facebook’s property, Instagram, now with more than 100 million active users, could still pose a threat to the social network’s business.
“One of the services that is, I think, a quite formidable competitor is Instagram,” David Ebersman, Facebook chief financial officer, told a crowd of investors today at the Morgan Stanley Technology, Media, & Telecom Conference.
The striking statement, made in direct response to a question about whether competitors are siphoning attention away from the social network, speaks volumes about Instagram’s status as a powerful photo social network all its own.
The comment, particularly when coupled with previous disclosures, also suggests that the photo app is stealing away member attention from Facebook with no payoff. Facebook may own Instagram, but it’s not profiting when members choose to use the ad-free app in favor of its ad-laden Web site or mobile applications.
In early February, Facebook confessed that some people — teens in particular — are indeed shifting their attention away from its own apps to competitors’ services.
“We believe that some of our users, particularly our younger users, are aware of and actively engaging with other products and services similar to, or as a substitute for, Facebook,” the company admitted in its 10-K annual report. “For example, we believe that some of our users have reduced their engagement with Facebook in favor of increased engagement with other products and services such as Instagram.”
Now, we have two pieces of evidence that depict Instagram as a cannibal. Instagram is, quite literally, eating Facebook’s young. And Ebersman, when asked specifically about how Instagram users are migrating over to Facebook, also admitted that the social network doesn’t yet know how the applications relate to each other.
The problem is an important one for the company to solve — and quickly. Facebook is maxing out its ability to show growth in the new user department, which means Wall Street will need to see an increase in time spent with the site to measure its health.
For its part, Facebook believes that its ability to algorithmically sort the News Feed and pluck out content people will find most interesting is core to keeping its members engaged, Ebersman said.