Instagram founders, Kevin Systrom and Mike Krieger, have resigned from Facebook. The popular duo of Facebook’s most popular asset have chosen to leave after growing tension and frustration with Mark Zuckerberg. This is the 2nd high profile departure after WhatsApp’s founders’ decided to leave earlier this year. As usage rates of Facebook “original” have started to decline, Instagram is one of the bright spots of the company. With the resignation news today, markets are worried of Facebook´s (FB US) growth prospects.
Instagram founders Kevin Systrom and Mike Krieger have resigned from Facebook. This happened due to growing tensions with Facebook’s Mark Zuckerberg according to several sources. Techcrunch writes;
According to TechCrunch’s sources, tension had mounted this year between Instagram and Facebook’s leadership regarding Instagram’s autonomy. Facebook had agreed to let it run independently as part of the acquisition deal. But in May, Instagram’s beloved VP of Product Kevin Weil moved to Facebook’s new blockchain team and was replaced by former VP of Facebook News Feed Adam Mosseri — a member of Zuckerberg’s inner circle.
Recode emphasizes;
Instagram co-founders Kevin Systrom and Mike Krieger are resigning from the company they built amid frustration and agitation with Facebook CEO Mark Zuckerberg’s increased meddling and control over Instagram, according to sources
All of this is post senior managers at Instagram leaving due team members feeling Mark Zuckerberg and Facebook wanted further control of Instagram. Instagram is considered to be Facebook´s best investment. It was bought for $1bn in 2012, and was recently valued close to $100bn (almost 1/5th of Facebook’s value). Fortune states;
Instagram would be worth more than $100 billion if it were its own company and not a Facebook division. The valuation is based on an analysis Bloomberg Intelligence conducted. If true, Instagram’s valuation would be 100 times greater than the $1 billion Facebook paid for the photo-sharing service in 2012.
Facebook has recently faced various forms of setbacks and negative attention, from their complacency in the 2016 election, to the departure of WhatsApp (acquired for $16bn) founders Brian Acton and Jan Koum. Furthermore, “original” Facebook has slowed its growth trajectory with a decline in 2018. Social Media today points out;
“The Infinite Dial research series from Edison Research and Triton Digital has been tracking Facebook usage since 2008, and that usage has steadily increased for ten straight years. But this year, for the first time in our tracking, the portion of Americans reporting that they currently ever use the service has declined from 67% to 62% among Americans 12+.”
This is in stark contrast to Instagram which recently surpassed 1bn users, compared 800m users in September 2017, continuing its growth.
With all recent departures, especially of people/members in charge of Facebook’s growth areas, investors are increasingly worried about the company’s ability to continue to grow as well as its ability to keep the engagement of users.
Any further signs of decline of members or usage will have a negative effect on the company. This comes on the back of the company earlier this year announcing it would invest more on security, putting further pressure on margins.
Finally, all of this is happening with the backdrop of more regulation coming from Washington and affecting all Internet companies, especially the giants Facebook and Google.
Facebook is down more than 25% since the highs. 160 is a big support level to watch carefully. A close below that and things could get even more fluid for Facebook.
Source: chart by Bloomberg
