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On Wednesday 9th December, Facebook became the second tech giant this year to face a major legal challenge after the U.S. Department of Justice (DOJ) filed two lawsuits against the social media company, saying it used a “buy or bury” strategy to obtain rivals, whilst keeping smaller competitors at bay. These legal challenges follow the well-publicised events in October, when the DOJ sued Alphabet Inc’s Google – accusing the tech giant of using its market power to fend off rivals.
The complaints focused specifically on Facebook’s previous acquisition of Instagram (for $1 billion) in 2012 and WhatsApp (for $19 billion) in 2014, and is the most significant legal action the US government has ever taken against the firm. Alongside accusing Facebook of abusing its dominance in the digital marketplace, the lawsuits are seeking a permanent injunction in federal court that could require the company to divest their assets, including Instagram and WhatsApp. So what will this mean for Facebook? Will they be knocked off their previously impenetrable pedestal?
What Will Happen if Facebook Sells Instagram.
Whilst Facebook’s dominance in the social media space is unparalleled, the loss of Instagram and WhatsApp will undoubtedly render Facebook at a disadvantage, and we’ll likely see the once ‘go-to’ platform become a much less appealing channel to advertise on. Being forced to sell the platforms (and subsequently losing the valuable insights they provide) means Facebook will no longer have access to crucial reporting data on user journeys and ad performance, which – alongside not having access to Instagram’s user activity – means they’ll have lower quality data to build out their audience.
With Facebook possessing a traditionally ‘older’ user demographic, a lot of younger users have moved away from Facebook towards Instagram, a feat that could end up being detrimental to Facebook if they lose that share of audience. Young users are among the most valuable new customers for many businesses, and Facebook currently has an excellent infrastructure in the Business Manager that pulls across this ‘younger’ user data from Instagram – a structure they would struggle to replace if they do end up having to sell Instagram.
We’ve highlighted some of the main issues Facebook might face if they end up divesting their assets, and losing their current Business Manager Structure. These issues are centred around; Data, Reporting, Time, Demographics, First Party Data, Online Conversions and User Journey.
As it stands, one way Facebook gathers data is through user interactions with content on site, ultimately speaking, the less they control, the less data points they have. With the loss of Instagram, Facebook will no longer be able to see specific user activity around specific topics, limiting their ability to put consumers in market categories. Facebook won’t be the only ones to struggle with data retention. If the social media giant is forced to divest their assets, then Instagram and WhatsApp will lose their access to Facebook pixel, meaning they’ll lose visibility of what their users are doing outside of their Social Media platform.
Facebook tracks on a user basis, rather than a cookie strategy, which gives them an unparalleled view on cross-device platform performance. The success of this is down to most users being logged into Facebook or Instagram across various devices. If Facebook no longer owns Instagram – and consequently loses insight into all users that are only logged into Instagram – their attribution and audience building becomes much more complex.
Ultimately speaking, having different social media platforms running on one Business Manager account adds a lot of value to one’s strategy. Selling Instagram would mean Facebook also loses their current Business Manager Structure, and advertisers would have to start operating separate set up processes – that add a barrier to entry – whilst implementing everything twice on two platforms, costing advertisers valuable time. There are various platforms out there that advertisers might want to target, as they have strong audiences, however, setting up accounts legally and getting pixels set up on site can be a big blocker for advertisers. Ultimately, some may feel it’s not worth the time and effort and stop with Instagram altogether.
Facebook has a declining and ageing user base, whereas Instagram has a considerably younger and ‘more active’ audience who are engaging and interacting with content, whilst looking for new things, trends and inspiration. If they are forced to sell Instagram, Facebook’s attractability as an advertising space will plummet due to their diminished access to Instagram’s user data.
First Party Data & Offline Conversions.
A benefit of Facebook’s maturity is it’s successful integration with third party companies. First party data lists and offline sales data can easily be uploaded into the platform, converted and then matched to existing datasets – this is particularly effective with identifiers such as email addresses and phone numbers. However, with a substantial proportion of the younger demographic deleting social media platforms such as Facebook (due to reports and documentaries), losing access to Instagram/WhatsApp’s first party data lists could be detrimental to Facebook’s targeting and attribution methods. Only having access to data from one platform means that they are likely to have a lower match rate, and the customer can’t be targeted or attributed.
Should We Be Worried?
Overall Facebook, Instagram and WhatsApp will struggle if Facebook is broken up, as they’ll lose all their cross-platform synergies. Whilst they’re the ones facing the charges, Facebook would ultimately be in the strongest position post break-up as they have Business Manager, which is an invaluable offering for any Social Media platform.
That being said, if Facebook’s previous lawsuit regarding the Cambridge Analytica Scandal is anything to go by, it is unlikely that we’ll see loss of Facebook’s assets. Back in 2018 Facebook was sued for failing to protect users’ personal information as 87 million people’s data was used for advertising during the elections. Despite the severity of the allegations Facebook was let off with an apology and a £500,000 fine. Whilst the lawsuit will likely span across a number of years, with the authority and budget Facebook currently has, the industry is anticipating that we’ll only see a hefty fine and settlement agreement for the social media giant.