Facebook (NASDAQ:FB) is under a lot of pressure to generate profits. Considering the huge buzz this stock has and its sky-high valuation, all this pressure to make money is quite understandable. Investors want results at the end of the day. You can only push them with hype and promises for so long. Eventually, the stuff will hit the fan, and they are looking for profits. They demand results or your stock will go down.
If you need proof of this, look at Google’s stock. It was not performing well up until fairly recently because investors were finally getting tired with all the pie in the sky technology innovation talk from this advertising company. That’s all Google (NASDAQ:GOOG) is. Investors know this. Unless Google knocks the ball way out of the park with a new service, it has to produce profits to justify its valuation. Investors aren’t dumb and they are not definitely infinitely patient.
Facebook knows this. This is why I have a tremendous amount of respect for Facebook CEO Mark Zuckerberg. He knows the game and the psychology of the market, and he knows his company in and out. That’s why I’m quite beside myself regarding Facebook’s strategy with Instagram.
Outside of tangential and advertising initiative, I truly believe that Facebook is leaving a lot of money on the table with this hot property. First of all, Facebook paid a lot of money to acquire Instagram. You’ve read the headlines of the billion dollars paid for this thirteen-employee that wasn’t making any money. With that said, Instagram, in terms of mobile traffic, is actually doing a lot of heavy lifting at Facebook. It’s making Facebook’s mobile strategy more competitive and more promising.
With that said, Facebook needs to be more aggressive in milking as much advertising money out of Instagram. One of the best ways to do this is to operate an exchange or platform where advertisers can sponsor Instagram publishers. The more people take photos that fit a certain theme, the more money those people would make. For every sponsorship dollar put in the system by advertisers, Facebook would earn a tiny commission. This isn’t going to generate a huge amount of money, but it’s something. Considering how Instagram’s influence economy works primarily on reputation, this can translate to quite a bit of money. Step your game up, Mark!