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How Facebook’s Instagram acquisition will impact social sharing / Rupert Staines

Rupert Staines, UK managing director of RadiumOne writes..

Although $1billion is a huge amount of money to pay for one
company, the investment is reflective of the sharing phenomenon that has taken
the Internet by storm over the past year (nma.co.uk 10
April 2012
). Today, the Internet is no longer a place to visit in
order to just collate and gather information, but a platform which consumers
primarily use to connect with friends and peers and share ideas and content.

Last year, Mark Zuckerberg observed that online sharing is
growing at an exponential rate with four billion things being shared per day. A
“share” should be considered anything from an email, a cut and paste, a
shortened URL, or, of course, a photo, and as sharing is fast becoming the
currency of the internet, it was natural for Facebook to further embrace the
phenomenon. As it gains an estimated 27 extra million users from its new
purchase, all eyes will be on how Facebook will take advantage of the increased
sharing activity, as well as its access to a new pool of targets.

Instagram users

Equally interesting will be how Facebook deals with the
major backlash it’s receiving from Instagram users. No sooner had Mark
Zuckerberg published his blog post announcing the acquisition, than users were
closing their accounts in droves, voicing fears that their feeds will be
flooded with advertising. Understandably, this could prove to be a major
headache for Facebook, but it would appear necessary if it’s to reach its
valuation.

While assumptions have been made that Facebook is looking to
knock out the competition, there is a more serious issue around justifying its
valuation in world that is becoming increasingly mobile focused. Facebook made
a staggering $4billion from advertising last year, but it has a potential
valuation with the imminent IPO, of $95billiion. It has to validate this somehow
and one of the key ways to meet this astronomical figure is naturally through
advertising. However, the problem facing Mr Zuckerberg is that, despite it
being a colossus of the Internet, Facebook remains a walled garden – it can
only reach the consumers within its perimeters, and this could prove to be
highly restrictive. Of course, its consumers can be targeted in a relevant
fashion, but in order to foster engagement (and meet this valuation), it’s
likely that the level of advertising will have to be intense. This is why
social targeting across the entire web (which represents roughly the remaining
90% of Internet use) is more favourable. It’s not as saturated, but it remains
relevant to the user in question.

The other concern for Facebook is that alternatives to
Instagram do exist. Hipstamatic, Incredibooth and Via.me are just a few of the
independent photo sharing sites on the market ready and waiting to attract
those users looking to defect from their preferred service.

However, consumers should remember that targeting has
becoming common place now and, after all, Facebook made its name through the
sharing of photography. Providing Facebook doesn’t saturate its new Instagram
audience with an abundance of adverts, this could well be a nifty move on its
part.

Rupert Staines

Rupert Staines is the managing director of RadiumOne UK. He joined RadiumOne from Specific Media, where he was a Senior Vice President. His online advertising experience goes back to 1998, when he opened offices for Valueclick in London, Paris, Munich, and Madrid and ran European operations through the company’s successful IPO in 2000. He will lead RadiumOne’s European expansion, starting with the London office and will be responsible for launching the company’s flagship product, RadiumOne, as well as RadiumOne Social and RadiumOne Mobile.

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