The Fall Of Instagram

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The Fall Of Instagram

"Never fall in love with any stock"

 - Peter Lynch

For those that have been following me for quite some time, this quote has been my rallying cry about any and all investments. No matter how much money you make from a stock or crypto investment it is never a good idea to "fall in love with stock". 

When I first bought Facebook $FB (now known as Meta $META) I think we all had a fairly strong understanding of what type of business it was - it was and still is what I like to call an internet advertising money printing business. Facebook sold ads that billions of people see every day and had acquired the golden unicorn social photo app bought for what turned out to be pennies on the dollar, Instagram. For years Instagram was the hottest app on the market and in my mind was the center of social interaction after Facebook drifted farther and farther away from social relevance. I thought to myself, "Instagram is what Meta really has going for it, there's no way they are going to destroy it as they did Facebook".

Well, I'm afraid to report that I was wrong, and to make matters worse it couldn't have come at a worse time - the advent of the greatest social media algorithm of all time, aka Tiktok.

Here's what I'm going to breakdown in this article:

• What's wrong with Instagram

• Instagram's Algo Negative Feedback Loop

• Where I could be wrong

• Instagram Management Is Out Of Touch

• Not everyone wants to a content creator / why I sold $META

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Where Instagram Went Wrong

I'll never forget when I got my first iPhone. I believe I was going into my junior year of high school and it was an iPhone 4s. Even though that model had been out a couple of years at the time it was such a dramatic shift from a slide to text 'non'smartphone that I felt like I was tapping into alien technology. Funny enough, the iPhone 4 came out the same year that a revolutionary photo-sharing app known as Instagram was uploaded onto the AppStore (2010). At first, and for many years, Instagram was an awesome way to share photos of what you and your friends were up to over the weekend or maybe you took the app a step further by trying to become the next Walter Mitty.

Don't get me wrong, it wasn't all sunshine and rainbows and the app still suffered the same problems that all social media apps were and still are plagued with today - internet bullying, scams, privacy issues, mental health concerns, etc. Nonetheless, Instagram was bought by Facebook in 2012 for a whopping $1 billion dollars. People thought Zuck was insane for a purchase of that magnitude but he ended up striking gold. Today the app is valued well above $100 billion.

Unfortunately, there was a dramatic shift in the past couple of years that has made the app almost insufferable to use and the people who grew up with Instagram are NOT happy about it. Here's my list of what, where, and how things went wrong:

#1 Did you say you want another Ad? 

The biggest complaint with Instagram has been the sheer number of ads that plague the app. There are ads if you:

• scroll through your normal feed

• tap through people's stories

• scroll through reels

• basically every corner of the app is infested with ads

As an experiment, I just opened Instagram and counted the first 11 posts on my feed and low and behold 4 out of the 11 posts were ads. Now I understand it's a free app and Instagram is a business but this is a massive spike from just even a couple of years ago that everyone notices. If you get pissed at the number of ads on your home feed you won't find solace in the stories or reels anymore too, it feels like every other story is an ad that you have to endlessly click through.

To add fuel to the fire are "suggested posts". These are just random people that Instagram's algo thinks you will like to see. Wrongo, I not only don't want to see it but it also feels just like another ad. Unfortunately, Instagram's upper management sees it differently and keeps pushing it on everyone even though there has been outspoken pushback (more on this later).

#2 The Instagram Algo Negative Feedback Loop

Now I understand there are some people reading this saying to themselves that complaining about ads is a typical lazy consumer argument for why Instagram is falling apart. Let me explain why the algo and the massive uptick in ads together have created a horrible concoction that in my opinion is killing the app. 

The answer lies in the 11 posts that I randomly opened the app up to while writing this. (again you can call BS on whether this is true or not or you can just try it yourself) 

Here are the 11 posts in order and what they are about:

1. @entrycooking - An Ad (hard to believe but it's true, the FIRST post when I open the app is a, you guessed it, an ad ... who's the product genius that came up with that idea

2. @historyphotographed - A history account I follow

3. @goodnews_movement - A good news account that shares wholesome videos

4. @friday.beers - College / Post College people content

5. @eater - Another Ad about cooking (Does instagram know that I'm hungry or what??)

6. @thenotoriousmmma - I follow Conor McGregor, sue me

7. @barstoolsports - Self explanatory

8. @goodnews_movement - Again

9. @livenationla - Ad

10. @friday.beers - Again

11. @usaa - Ad

Are the 4 out of 11 posts being blatant ads annoying? Yes, but real the problem lies between the ads. Let me spell it out in plain English:

NONE OF THESE ACCOUNTS ARE MY FRIEND'S POSTS

The reason for this is that Instagram's algo favors accounts that post in volume. These are content accounts like Barstoolsports, an NFL football team, your favorite cooking program, etc. that post multiple posts and stories a day. Notice how out of the 11 posts I saw two were repeated? Content creators also post multiple posts a day since making content is how they make a living so, in turn, they have to partake as well. Because of this, your actual friend's posts of their weekend activities don't show up nearly as much as they use to. To add fuel to the fire the "feed" isn't a feed at all like it use to be. The friend's posts you see aren't in any true timeline - some are from hours or even more likely days ago. To make it even worse, when you keep scrolling you get to what I like to call "no man's land".

What is "No Man's Land"?

Back before Instagram was essentially ruined if you missed a week of social media because you wanted to touch some grass for once in your life you could just scroll through your feed and see in chronological order what your friends posted while you were away. That has been completely thrown out the window because TL, DR: it doesn't make Instagram money. The new feed isn't actually a feed at all. If you scroll past around the 10th - 15th post it goes into a straight "suggested post territory" in which posts of accounts you don't follow and ads are exclusively only shown. If you are so lucky and happen to catch that you are in no man's land by the small "Suggested Posts" label put discreetly on the top and click out of it by selecting the "Older Posts" in blue you are then taken back to the normal cesspool of non-chronological, ad-filled, suggested post, and content account home feed. A summary of everyone's anger is below:

Devil's Advocate

As a prudent investor, you have to always look at the other side of the coin. Below are some possible suggestions of where I could be going wrong:

1. I'm older: People naturally my age (25) have started to drift away from posting on Instagram and other social media apps as a whole. People in my age group could possibly have just stopped posting normal content as much so this negative algo feedback loop is much more obvious and aggressive on my Instagram "feed".

2. Stop following content accounts: Although this is something that I largely actively do in the first place, maybe I need to completely unfollow all content accounts. Out of the 1,064 people I follow on Instagram I follow around 20-30 accounts that aren't my friends. Would my experience be improved if I unfollowed these accounts that post 3-5 posts a day? Likely, but most of these well-curated followings are accounts that I have followed for years and are what made Instagram that much better for me. Why wasn't there a problem 2 years ago when I still followed these accounts?

3. I don't have hard data: Any big tech's real algo outlines are worth billions and are kept in secret more than Coca-Cola's formula. My argument is purely based on my experience with the app for over a decade and isn't based on absolute algo coding fact. However, again you can just go on Instagram and poke around and see for yourself.

Call me lazy or just a hater but those are the only three bullet points that I could come up with for why my way of thinking and experience on Instagram is jaded.  

#3 Management Is Out Of Touch

I could write an entire newsletter about how out of touch Instagram management is. Luckily, people on Twitter and Instagram have complained to management about many of the things outlined in this newsletter enough that the CEO of Instagram has addressed them himself. Instagram's PR team should have promptly been fired for letting this guy make a video because oh boy was this a nightmare. It all started with Kylie and Kim Kardashian posting on their Instagrams this story stating:

"Make Instagram... Instagram Again. (Stop trying to be tiktok I just want to see cut photos of my friends.) Sincerely, Everyone"

This story was seen by millions of people since Kim and Kylie together have a following of 696 million followers on the app. Shortly after these stories came out and were reposted by millions, the CEO of Instagram Adam Mosseri took it upon himself to release a video of him explaining the problem? 

Yes, that question mark is put there on purpose because I thought of Will Ferrell from Anchorman reading the cue cards when I watched the response - anyways see for yourself how Adam completely botched this PR nightmare. 

Okay to start, once again I could spend an entire newsletter picking apart this response. Before I get into it, I want to say I have nothing against this guy and he is actually doing things that most CEOs don't do. He makes videos constantly talking about every single update that Instagram is making and/or things they are thinking about changing. However, the timing of this video was directly after Kim and Kylie's post so everyone on the internet knew this was his time to rebuttal. 

Long story short this is what he said:

• He addressed a test that completely copied Tiktok in which some user's posts were in a reel format (everyone hated it and they yanked the cord on the test a couple of days later)

• Instagram is and will continue to lean into short form video content

• He says that videos are being liked more, shared more, etc. and that's why they are going in that direction (hmm are you sure it's not because of your algo pushing it?)

• Then he talked about suggested posts and how you can turn them off for 30 days if you don't like them

• Talks about how he wants creators to be supported more and more and suggested posts help with that

Now you probably have noticed that he only addressed maybe one of my points about why Instagram is failing and he also completely missed the mark about why Kylie, Kim, and a billion others are pissed about what Instagram is doing.

So of course he got heavy flack for it and this was his response in the comments:

He states "all the growth in photos and videos from friends has been in stories and DMs" which completely proves my point about the negative feedback algo loop.

People have stopped posting going on Instagram because of so many ads/not seeing their friend's posts, thus making people see content from accounts that the algo favors (high volume), thus making people more annoyed, thus forcing Instagram to have more ads because they are losing money, and round and round we go. 

#4 Not Everyone Wants To Be A Content Creator

Reminder: This stance is coming from a content creator, with full full-time content creator friends, deeply involved in the creator economy, and who also spend hours making content a day.

 Instagram's magic was in connection with people you know and their real-life experiences, not a 30-second tutorial on how to bake a vegan cake. Since you aren't seeing your friend's posts because people are going on Instagram less and thus posting less you are then seeing more ads and content from accounts that post multiple times a day (content creators/media accounts).

Instagram thinks that pushing this short-form video content is best for content creators. The only problem is the app isn't made up of content creators and content creators aren't the reason why the app grew to prominence. I don't have the numbers but let's say maybe 1 out of 200 people you know are serious content creators, why would you then gear your entire app to that?

This short-form video content push and algo shift is all a desperate attempt to compete with the app that is killing all social media apps: TikTok. Tiktok is kicking Instagram's ass not only because of its superior algo but also because it actually doesn't favor content creators, it's a meritocracy of what is the best content out there. Some random guy in the midwest with 10 followers could make a funny video of him jumping in hay and it could gain 2 million views - why? People saw it and liked it because that was the best content at that specific time. You could have 10,000 followers on Instagram and make the best photo or video of all time and it would likely go nowhere. 

Long story short:

Instagram is trying to be TikTok but they are failing miserably because of their weaker algo and in turn, the app gets worse by the day because as they lose the battle they are pushing the negative algo feedback loop further into oblivion. 

Instagram's only option is to get back to their roots, if not I don't see how much longer they can survive before an app that comes along that does... cough cough BeReal, Dispo, and others.

In conclusion, all of this including stagnating revenue growth and severely dropping net income growth is why I sold $META.

Thanks for taking the time to read and maybe share it with a friend or two.

Have a great day and tell someone you love them,

Gannon