Sample Marketing Case Study on Instagram

Instagram

Instagram is one of the most popular social media networks based on the sharing concept, where users share photos of their social life. While one of the most recent of the social media sites, Instagram has created a sensation for itself, receiving approval among its users and investors, as well as a nod from Facebook that bought it for $billion in 2012 (Luckerson). The ease in use, friendly user interface and image filters, as well as the ability to share the images on Facebook and other social media networks are among the reasons for Instagram’s increasing popularity. Although it continues to face competition from other budding social media platforms such as Snapchat, Instagram continues to grow having 400 million users as of 2016, a proof of its popularity given that it eclipses Twitter’s number of users.

Instagram operates in the social media industry, one of the most competitive and fastest growing industries in the world. The social media landscape today has more than 100 social media platforms, but each of the players in the industry serves particular niches. The landscape has platforms operating on different categories including purchases (tripadvisor, Bookset, and Polyvore among others), localization (Plancast, Path and Yelp among others), microblogging (Twitter), and sharing, where Facebook, Instagram, YouTube, Vimeo, Scribd among others belong (Cavazza). The sharing social media platform is a fluid industry, and each player within the industry works to ensure it provides the best experience for its users. Currently, there are more than 2 billion active accounts on social media across the world, representing 29 percent of the world’s population (World Newsmedia Network 3). The social media industry, particularly sharing is not a preserve of the young, although they are the majority users. Statistics indicate that of all the social media accounts, individuals aged 16-24 have an average of six social media accounts, even as those between 35 and 54 average four accounts, while those 55 and above average three accounts (World Newsmedia Network 3).

Currently, Instagram is among the top sharing social media sites in the world. With more than 400 billion users, Instagram has proved popular, especially among the young (Luckerson). However, the social media platform faces a lot of competition from other platforms. With 1.8 billion monthly active users, Facebook is still the world’s most popular social media network, and although Facebook owns Instagram, it competes with Instagram for number of active users (Hutt). Facebook offers more in interaction than Instagram, a fact that has increased its level of popularity across the world. Twitter is additionally a formidable competitor. With 330 million active monthly users, the microblogging platform competes for the same users as Instagram. Twitter’s differentiation is in the number of words users can use (140 characters), a fact that has largely more mature users to the platform. LinkedIn is another competitor that has gained popularity. The social network largely attracts professionals and job seekers through mutual connections (Hutt). Moreover, Instagram faces competition from regional social networking platforms such as QQ and WeChat in China with 877 and 846 million users respectively.

The social media industry has low barriers to entry; this means that the potential for new entrants is very high. Snapchat, a relatively new entrant into the social media industry is already drifting traffic towards it from Instagram, specifically among young users—a forte that Instagram previously owned (Huddlestone). In the U.S. alone a statistical predictions by eMarketer indicate that Snapchat will overtake Instagram among users between 12 and 24 years in the U.S., with a 40.8 percent growth (Huddlestone). The potential for new entrants in the industry is especially high given the difficulty in preventing competition from creating similar features in their products. Differentiation therefore becomes the only way to remain relevant, such that Instagram is photo-centric; Facebook relies on connections (friends), while Twitter is largely big on status updates.

The ease of potential entrants into the social media industry means that there are various substitute products for Instagram in the industry. The initial purpose of social media outlets usually presents the defining difference. However, the industry players are in such a way that different features including instant messages, photo sharing, and status updates are all standard among all the competitors in the social media industry. Therefore, Instagram has many substitute products, one of them being its sister service Facebook (Huddlestone).

In looking at suppliers, there is very low cost of switching suppliers for Instagram. Many security companies supply security features that Instagram can use, in addition to others that provide cloud computing, on-demand storage and server capability for Instagram. For this reason, suppliers have low bargaining power over Instagram, especially given Instagram’s popularity.

The social media industry is an intensely competitive industry with a lot of market output. The intensity of the competition therefore means that complacency is not an option for any social network. Customers (users) are especially choosy and demanding; the relevance in features and uniqueness therefore is what pushes customer to the network. It is thus upon the network to not only work to attract more users, but also increase its popularity as a means of attracting buyers, largely advertisers as a means of giving it leverage in price negotiations. Buyers therefore have high bargaining power, given the many options available in the social media industry.

Social media continues to have projected growth as Pew Research indicates that while 5 percent of the American adults used social media in 2005, the percentage has grown to 69 in 2017. There is projected increase in the use of social media across the world, a fact that means opportunity for growth of revenue in advertising for social networks. Social media also has opportunity in internet penetration and smartphone adoption. Increased internet penetration means more users can access the internet and social media sites, while most smartphones come preloaded with social media applications, increasing the reach of social media.

Privacy on the other hand, remains a threat to the industry. More users are concerned about their privacy, and the use of their data for advertising. Such concerns are a threat to the industry that relies on advertisement and user data. Additionally, rivalry and intense competition is a threat to the industry, leading to the demise of some industry players such as MySpace. Censorship in countries such as China, which is a huge potential market for social media, is a threat. China has recently blocked WhatsApp, while Instagram and Facebook are largely unavailable in the country (Bradsher).

At its founding, Instagram’s objective was to allow the world share moments. The company aimed at making it easy for people to share precious moments through the service by posting pictures and videos. It has continued on this objective even after its acquisition by Facebook by adding other features to the service such as Instagram stories. However, even with the objectives, the company has some constrains among them getting more users to the service. Already, Snapchat, a new entrant into the social media industry is gaining more users than Instagram (Huddlestone). Additionally, the company has had a series of outages, the most recent one in August 2017, when hundreds of users were unable to get online on the service (Austin).

On its financials, Instagram has proven to be a lucrative acquisition for Facebook. The company, which opened its advertising to the world in 2016, has had a stellar financial performance (Griffith). In the fourth quarter of 2016, the company had $730 million in revenue, a growth from the $630 million Instagram earned in 2015 (Chaykowski; Griffith).

In the management of Instagram, co-founders Systrom and Krieger insist on keeping a small management team, which has continued to be the case for the company even after its acquisition by Facebook. The company’s management philosophy, even after acquisition, remains, “Do the simple thing first” (McCracken). Through the management philosophy, Instagram has been able to grow the number of users, its revenue, and since its acquisition, the number of engineers who are currently working on the service to keep it running.

Although acquired by Facebook, Instagram runs as an independent entity, with Systrom at the helm as CEO and co-founder. The CEO is responsible for the overall vision and strategy of the company, in addition to the day-to-day operations. Below Systrom is Krieger, who works as the company’s CTO, and head of engineering, and focuses on building the company’s products. At the same level is Marne Levine, who is the COO. Reporting directly to the CTO are other executives for different departments of the company including engineering, brand development, business, EMEA brand development and global creative programs. The executives work to keep the service running, ensuring its profitability, brand recognition and value, as well as fluid user experience.

Like its management culture that focuses on doing simple things first, Instagram has cultivated the same to become its corporate culture. The founders cultivated the “Do the simple thing first” mantra into both the management and corporate culture as a way of inspiring creativity (McCracken). The culture is a matter of necessity, having emanated from the limited resources and labor the company had during its founding years. Moreover, the culture has so far seen the company deliver fast and smooth user experience in its services (McCracken).

Instagram has grown over the years due to some of the strengths it possesses. Among the strengths are the community and the value proposition it offers. Moreover, it is low-touch, largely based on photo sharing making it easier to engage users. Additionally, Instagram has one of the most efficient user interfaces and speed in interaction whether on the web or on mobile. The use of hashtags, Instagram stories and Instagram live all appeal to the masses increasing its reach and user base.

However, Instagram is largely self-contained and its web traffic does not link it to other sites. Such a self-containment makes it inappropriate for companies that want to link their photos to their websites for marketing purposes. The service additionally has limited liking and commenting in addition to requiring users to follow a user to view the user’s content, unlike Facebook that allows interaction even without liking the page or having the individual as a friend.

Instagram must use its strength for its further development by improving the features that attract users to the platform. Capitalizing on its service speed and efficiency, the company can work to add more features to the services especially in light of competition from newcomer Snapchat. Even more important is turning its weaknesses, particularly in linking to other sites and on liking and comment. It should give more leeway in its future development as a social networking platform.

 

Work cited

Austin, Henry. “Instagram is down: Picture sharing site not working as user struggle to get online.” The Independent, 2017, www.independent.co.uk/life-style/gadgets-and-tech/instagram-down-app-website-not-working-broken-is-it-me-outage-problems-bugs-a7914281.html.

Bradsher, Keith. “China blocks WhatsApp, broadening online censorship.” The New York Times, 2017, www.nytimes.com/2017/09/25/business/china-whatsapp-blocked.html.

Cavazza, Fred. “An overview of the social media ecosystem.” Forbes, 2012, www.forbes.com/sites/fredcavazza/2012/03/12/an-overview-of-the-social-media-ecosystem/#16b986425e7d.

Chaykowski, Kathleen. “Instagram, the $50 billion grand slam driving Facebook’s future: The Forbes cover story.” Forbes, 2016, www.forbes.com/sites/kathleenchaykowski/2016/08/01/instagram-the-50-billion-grand-slam-driving-facebooks-future-the-forbes-cover-story/#3ba149504a97.

Griffith, Erin. “Instagram will be a $3 billion business this year: Analyst.” Fortune, 2016, ortune.com/2016/01/25/instagram-3-billion-business-this-year/.

Huddlestone, Tom. “Snapchat could overtake Facebook, Instagram among young U.S. users for first time.” Fortune, 2017, /fortune.com/2017/08/21/facebook-instagram-snapchat-usage-rates/.

Hutt, Rosamond. The World’s most Popular Social Networks, Mapped. World Economic Forum, 2017, www.weforum.org/agenda/2017/03/most-popular-social-networks-mapped/.

Luckerson, Victor. “Here’s proof that Instagram was one of the smartest acquisitions ever.” Time, 2016, time.com/4299297/instagram-facebook-revenue/.

McCracken, Harry. “Do the simple thing first: the engineering behind Instagram.” Fast Company, 2015, www.fastcompany.com/3047642/do-the-simple-thing-first-the-engineering-behind-instagram.

Pew Research Center. Social Media Fact Sheet. PRC, 2017, www.pewinternet.org/fact-sheet/social-media/.

World Newsmedia Network. Global Social Media Trends: 2015. European Publishers Council, 2015.