Facebook Inc (NASDAQFB) shares were down 1 percent in Thursday afternoon trading just hours before the company’s Big Idea event. The social network is expected to unveil a video sharing capability for Instagram, the popular photo sharing app it acquired last year.
Facebook’s Announcement Won’t Be A Surprise
Of course it’s to be expected that Facebook Inc (NASDAQ:FB) shares wouldn’t be affected too heavily by the announcement, which isn’t much of a surprise. Competing social network Twitter already offers the video sharing capability through the Vine app.
Ovum analyst Eden Zoller doesn’t believe Facebook Inc (NASDAQ:FB) has known what to do with Instagram since it acquired the app, especially since it has made no major enhancements to the service. Zoller questions why Facebook Inc (NASDAQ:FB) didn’t introduce this capability sooner, especially in light of how popular Twitter’s Vine app has become.
Twitter’s Response To Facebook?
According to Zoller, Twitter might not let Facebook Inc (NASDAQ:FB) get away with releasing a video sharing service like what it offers. The analyst predicts that Twitter might have some sort of answer that would “undercut Facebook’s efforts.” In order to prevent that, Zoller says Facebook Inc (NASDAQ:FB)’s service had better be spectacular.
“Facebook will need to come out with something compelling,” said Zoller, “Particularly in light of recent lackluster new initiates such as Facebook Home, and also ensure that the video features on Instagram are in keeping with the ease of use and simplicity that have made the core photo sharing service so popular.”
Will Facebook Monetize Instagram?
Zoller also points out the fact that Facebook Inc (NASDAQ:FB) still has yet to find a way to monetize Instagram. Analysts have been clamoring for this to happen for quite some time. Late last year, analysts at one firm estimated that Facebook could bring in an extra $500 million to $700 million in advertising revenue over the next three years if it monetizes Instagram properly.
In December, Instagram was at the center of a controversy involving the app’s new privacy policies. It appeared as if Facebook was indeed trying to monetize the app by selling the photos of its users, but Instagram’s CEO instantly backtracked, and the privacy policies were rewritten after he promised they wouldn’t sell their users’ photos.