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Instagram and Google’s Social Problem

April 24, 2012

Some of the smartest commentary on Facebook’s $1bn acquisition of mobile photo sharing app Instagram came from Don Dodge, a Google executive. His blog post “I could build Instagram in a week” also helps to illustrate the challenge facing his own company’s social network, Google+.

Here’s the reason that Dodge, a seasoned insider in both the world of startups and giants like Microsoft and Google, gives to explain why it made sense for Facebook to buy Instagram instead of building its own version for much less money:

First Mover Advantage is real. The first product on the market has a big advantage…People get used to the product, get to like the user experience, and develop a user community culture. Once the user community starts to grow virally they are not likely to switch to another product…even if it is better. A competing product with a few new features, or something that is faster or cheaper, isn’t likely to steal away many users.

What he says would seem to apply equally to Google+, a social network taking on well-established “first movers” Facebook and Twitter. 

Dodge’s second example, in which he explains why Google had to spend $1.6bn on YouTube despite having its own very similar Google Video service, underlines that connection. Dodge doesn’t mention Google+, but the message of his post seems to be that Google’s best route to becoming a force in social networking was to buy rather than to build.

It now appears to be too late for Google to switch strategy. There are rumors that the search and ad giant was also in pursuit of Instagram but was outbid by Facebook, and now there are few candidates left for an acquisition. Facebook is clearly not for sale, and Twitter (despite reported revenue struggles) also seems set on an independent, publicly listed future. Foursquare might well be looking to sell and has a respectable user base, but the company’s founders had their first location sharing startup bought up and shut down by Google and may be leery of repeating the experience. 

Path, a mobile-only social network exhibiting healthy growth, is another possibility, but the prospect of picking up a social networking company with user base to rival Instagram seems slim. Google will likely have to build its social network the hard way and keep pushing Google+ on users of its more established, and more successful services. Google’s CEO Larry Page recently claimed “healthy growth” for his social network, but concrete figures have not been made public and there are few outward signs that Google+ is a success.

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