Mark Ritson: Moving closer to Facebook is dangerous for Instagram’s brand

No company before Facebook has had so many users while being so disliked, but the risk of moving Instagram to the same platform is one Mark Zuckerberg seems willing to take to keep control and integrate the brands’ data.

Facebook Instagram platform

A big move at Facebook will see the company unify the technical infrastructure behind Facebook Messenger, WhatsApp and Instagram into a single operational platform. The brands will continue to present themselves independently to users but, by early 2020, the platforms will be reconfigured to run from the same operational system.

When Facebook acquired Instagram and WhatsApp both deals were structured in such a way as to indicate that the platforms would continue to operate with significant independence from the Facebook mothership. “We need to [build] on Instagram’s strengths and features, rather than just trying to integrate everything into Facebook,” Mark Zuckerberg announced when he acquired Instagram in 2012.

So what has sparked such a major strategic revision?

When companies acquire brands to sit alongside their existing offers there is usually a grace period and then a prolonged and more painful stage of integration. Facebook has signalled that it still plans to operate as a ‘house of brands’, with each of its platforms appearing as an independent and autonomous brand to users.

That makes total sense given both Instagram and WhatsApp have much more potential than Facebook to grow in the future. In a house of brands the consumer sees different, distinct entities at the front of the house, but in the back office all the revenues eventually culminate on a single, unified balance sheet. Every house of brands shares a similar dual organisational challenge: distinction at the front, singularity at the back.

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The trick for any house of brands is to work out the optimum point where that distinctiveness turns into singularity. There have to be distinctive logos but there can only be one share price and one CEO. In between there is a grey area and the key issue of whether functions should be run by the group or by the brand. And there is no simple answer to any of these questions.

Should a brand have its own HR team or use the group’s services? Should all the products be manufactured in a group facility or should each brand be allowed to run its own production? One agency or many? Is corporate social responsibility done at the group or brand level?

Back-of-house integration

In my experience of working with companies like this, the secret is to draw the line between front-of-house brands and back-of-house group operations as close to the front as is strategically viable – so as to increase synergy and scale – while not making it so shallow as to undermine the brands and ultimately kill the golden goose of brand equity.

It makes sense that Facebook wants to unite its disparate platforms together at the back of the house. It will allow users to communicate directly with others using alternative platforms without the hassle of jumping from one login to another. This simple compatibility should improve user satisfaction across all three platforms and it also fits broadly within Mark Zuckerberg’s oft-quoted purpose of connecting the world together.

It will also give Zuckerberg far more power over his empire. Having different generals running separate armies on the other side of the hill is a risky way to win the war. There were multiple reports from inside Facebook that the respective founders of both Instagram and WhatsApp struggled with Zuckerberg’s desire to control their operations post-acquisition. These founders have now all left the building and Zuckerberg is free to pull his empire closer together while eliminating any immediate and obvious potential replacements.

Snigger all you want, but if you had built an empire like Facebook and then been threatened so frequently with expulsion, you’d be removing them too. Zuckerberg wants control and he wants it for a very long time.

There are many who argue it’s a matter of time before Instagram becomes the most valuable brand in the Facebook portfolio. Given that potential, why risk its longevity?

Linking the platforms is a gigantic feat but, once complete, it also creates another handy strategic advantage: intractability. There have been increasing calls for the breakup of Facebook given the fact that in many countries Messenger, Instagram and WhatsApp represent a significant slice of the user’s total digital time.

It’s unlikely that a Republican/Trumpian US government would propose any such breakup but with Democrats potentially only two years from the White House it’s easy to see why stitching all the apps together into a single operational unit could prove invaluable in the legislative battles that Facebook might face in the future. Once these digital knots are tied it will be impossible to separate them again – whatever the edict from Washington, DC.

Uniting the platforms together also opens potent opportunities for even more user data. If Facebook can join the dots between what people are messaging about across their platforms, to multiple people, during even more occasions, it could add bucket-loads more information to each user profile. Facebook tried to link data from WhatsApp users to bolster Facebook advertising last year only to have the move blocked by the UK and other European governments based on data privacy concerns. Could this new structure be an attempt to enable this synergy in a manner that evades any government sanctions?

Facebook’s toxic brand

For all the apparent advantages of the integration, this is a very risky move. Facebook is unique both in its global penetration and also its cultural toxicity. Never in the history of capitalism has a brand been so hated and yet so patronised.

You only have to look at the popularity and suspicion surrounding the recent ’10-year challenge’ – where people posted a decade-old photo next to a contemporary one – to get a perfect sense of Facebook’s unique and precarious position within global culture. Is it a harmless meme or a sophisticated way to source facial recognition data to help Facebook’s AI protocols?

Fucked if I know, but the debate provides a perfect window on the massive distrust that surrounds both Mark Zuckerberg and Facebook at the moment. Whatever the explanations for its situation, the one obvious brand management implication would be keeping your current and future acquisitions ring-fenced from Facebook’s toxic brand image.

READ MORE: Government targets Facebook and Google with digital ad tax

Instagram was an astonishing deal. To buy that platform, at that time, for that price, proves that Zuckerberg is a strategic genius. Without Instagram where would the Facebook share price be right now? There are many who argue it’s a matter of time before it becomes the most valuable brand in the Facebook portfolio. Given that potential, why risk its longevity and, thus far, its perception as an independent and separate entity from Facebook with this new decision to move them closer together?

It could be that Zuckerberg believes that he can execute the move perfectly. If he does, by 2020 Facebook will enjoy all the advantages of more data, lesser risk of breakup and total Zuckerberg control, while maintaining the illusion that these brands remain separate and independent entities in users’ eyes.

It’s certainly possible. Consumers agonise over buying an Audi or VW, asssured by the knowledge that these two brands are derived from exactly the same company. Drinkers argue late into the night over the relative merits of Veuve versus Moët, ignorant of their status as part of exactly the same company. Perhaps Instagram and WhatsApp can supply user data to Facebook without compromising their apparently separate standing in the mind of users.

Then again, perhaps Zuckerberg does not care. Facebook is his baby. It always was. If he has to compromise his adopted children to ensure the continued health of his first born then so be it. Sometimes all the data in the world cannot sway a decision that is born from emotion and control. If Zuckerberg has learned anything thus far in his titanic media career it’s that the more data Facebook can amass, at any price, the stronger his business becomes.

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Comments

There are 3 comments at the moment, we would love to hear your opinion too.

  1. Thomas Kennon 30 Jan 2019

    We need to dig a little deeper on this one, as it is *not* primarily a brand / business integration challenge, with all the public facing issues those provoke. Three crucial pieces missing from the above analysis:

    1. Technical / privacy – The real story here is FB’s intent to combine Whatsapp, Instagram + FB/Messenger into an integrated messaging communications platform. Big problem is Whatsapp is (famously) unique in its E2E (end-to-end) data encryption. It is doubtful FB will apply such rigorous privacy controls on the newly merged-up messaging platform, thus this security is lost. Oh well… you can’t monetize what you can’t read and sell.

    2. Regulatory / criminal – Perhaps ‘criminal’ is a bit strong. For now. As you glancingly refer to, there ar political pressures building, maybe – but these pressures become manifest in the form of deeper legislative (US/EU and UK) attention leading, potentially, to break-up regulatory demands. The flow of revelations of the past 12 months regarding FB’s unfathomably cavalier approach to bilking children, cutting secret side deals with data partners, exposing user data through partner apps, etc. begin to suggest there’s a criminal conspiracy case to be made. Fraud, theft, you know – criminal.

    3. Shareholder exodus – In the end, within the frame of our shared neoliberal chaos, the only thing that really matters to the people that really matter is the potential liability and devaluation accruing from points 1 and 2 above. Facebook is poised this week (today, Wednesday) to announce 4th quarter earnings and analysts suggest a possible ‘dont-worry-be-happy’ readout. Watch for this to be one their last like that, and stock dumping to accelerate as the political pressure builds to break them up and – if there’s any justice (and there aint…) in this cold world – start putting execs in jail.

    TK | Free Radicals | NYC

  2. Gavin Johnson 30 Jan 2019

    How are we determining how Facebook is “disliked”? From where I sit, the media “dislike’ Facebook because negative news makes for ‘so called’ good reading and government rightly asking questions BUT go beyond the reality of the situation because they think that’s what voters want to hear. The reality though, data about active users and Facebook revenue tell an extremely different story. Don’t get me wrong there are issues that need to be dealt with BUT the Facebook story being told in the media and within government is so far from the reality of the situation from a business and users perspective it’s frightening!

    As for the individual brands, there is no way Zuckerberg is going to mess with them on the front end. No way!

  3. Jamie Heaton 31 Jan 2019

    The other consideration for me, is that by stabilising these 3 brands, they leave themself in a better position when they acquire and integrate other platforms. ‘Toxic’ or not (and I tend to think to Gavin’s point above, its less so to the avgerage user, than media), Facebook is the main game in town at the moment in the West. Beyond being broken up through regulation like you mention Mark, the main challenge to them is if something else comes along that becomes more attractive to its userbase (like Instagram has evolved into). Facebook has shown with WhatsApp and Instagram, it will acquire where its right to do so. Through this consolidation, its going to help it avoid becoming a bloated mess when it adds the next 1 or 2 challenger platforms that spring up over the next decade.

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