By Vineeta Dwivedi and Yash Singh Juneja

When Facebook changed its name to Meta one year ago, some expressed surprise over the macabre Hebrew meaning of ‘meta’ – which means ‘is dead’. The company’s market value which had peaked at $1 trillion in September 2021, has been a train wreck since then. Stocks of Meta Platforms Inc have tanked 67%, and it has lost $700 billion in market value. The company’s latest earnings report shows that sales shrank by 4% in September to $27.7 billion, and profits have halved.

While CEO and founder Mark Zuckerberg has remained steadfast in his belief in investment in virtual reality, that vision of Metaverse is expensive and has not paid off so far. Facebook remains the biggest social media platform on the internet, but it is not adding any new users in the US and Europe. In other parts of the world, too many have either deleted the app or rarely visit their Facebook account. WhatsApp, another big platform owned by Meta, maintains a vast user base, but its revenue creation is still nascent. Instagram is the only one still keeping hopes of growth afloat.

Since the bulk of the revenue for Meta (97%) still comes from advertising, growth in the monetisable audience is critical for its business. That is where the 2012 acquisition of Instagram seems to have paid off, as it has become a major revenue churner for Meta. According to the latest figures released by the company, Instagram has two billion monthly active users worldwide, closing in on the 2.96 billion Facebook users.

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The growth and growth of Instagram

The silver lining in Meta’s otherwise dismal Q3 earnings report was the stupendous growth of Instagram’s monthly active users. Instagram hit its first billion in 2018 but reached the second one in just four years, and this huge jump is generally attributed to engagement due to Reels. The company says people share a billion reels every day on Instagram. While social media trends continually change and evolve, Instagram emerged as a photo-sharing app that swiftly adopted itself to cash in on the video craze. As long-form videos lose the appeal, shorter clips, such as Reels, dominate the feeds on our phones.

Instagram also led to a sustained new cult of influencer marketing that only YouTube and TikTok can rival. Instagram gained massive importance in digital marketing plans. Brands have had easy, targeted access to communicate directly with consumers with visual content, allowing interactivity and virality via hashtags. Important for digital marketing strategists to note that more than half of the global Instagram population is 34 years or younger. It is the most preferred platform for Millennials and Gen Z users. Safe to say that young people prefer Instagram.

Combined with its addictive power and capitalising on people’s tendency to show off, this platform has given rise to a new cult of followers who prefer it over any other means of social media entertainment. With its Laissez-faire attitude towards underage users, Meta has only captivated even younger audiences and grown phenomenally in the last few years. India is contributing hugely.

Insta love in India

India has added 100 million users to Instagram every nine months and now contributes to nearly a quarter of its total user base. And it is still growing. A big reason behind Instagram’s growth was, ironically, the ban on TikTok, whose popularity in India skyrocketed after its launch in 2016. However, by 2019, the app had been banned, just as its 200 million active users needed a new platform, which Instagram was happy to fill. Jumping on the trend, Instagram cashed in with Reels and continued to draw users to its platform. Content creators on the platform now primarily use Reels to reach their followers.

Instagram has one of the lowest costs per click of any social media platform in India regarding advertisers. It provides a plethora of tools for advertisers, such as gender, age, and even searched topics filters, which make targeted advertising a breeze. It is an ideal platform for start-ups or small businesses because it can target users of the right age and demographic. Advertisers have flocked to Instagram, poured money into the platform, and creators have grown exponentially.

Instagram’s Challenges

The most prevalent of these issues are fake accounts, with an estimated 95 million fake accounts on Instagram. The recent outage and trouble with some accounts were attributed to a purge being undertaken by Instagram. These fake accounts could be the ticket for many micro-influencers to monetise their work and everyone is after the number game. With scammers prowling the web, content theft and impersonation is also growing issue for creators.

With the anonymity of the internet, stalking and trolling are easy, and vulnerable young people are known to fall into easy traps of self-doubt and self-loathing, as well as narcissism and voyeurism. This has caused some loss of faith in Instagram. With tech giants like Apple pushing for more features that give users more privacy, Instagram’s monetisation has become more difficult. Meta has set up a new division called New Monetisation Experiences for the platform’s future may lie in paid features. These strategies are an attempt from the platform to shift away from solely relying on advertising for revenue.

The company has increased its focus on augmented and virtual reality products and services. Mark Zuckerberg believes that Metaverse is the future of computing, but that part of his business remains massively unprofitable. According to an analysis, Meta has put $36 billion into its Reality Labs division (which houses the social-media giant’s VR and metaverse arms) since 2019. Yet, it has posted a $3.7 billion operating loss on revenue of $285 million recently, and investors have urged Meta to go back to the reliable core business of advertising. Until Meta can start making money through its virtual reality products and conquer the eponymous Metaverse, Instagram will likely keep the business afloat.

(Vineeta Dwivedi is faculty at Bhavan’s SP Jain Institute of Management and Research, and Yash Singh Juneja is a PGDM student at SPJIMR. Views are personal.)