Articles   •   May, 2017   •

Instagram recently announced reaching its 700th million users milestone. That is a growth of 100 million users in just 4 months. An impressive feat that supersedes its previous 100 million user growth record, set between June and December last year. This staggering growth coincides with the roll out of features that are similar to those found on its rival Snapchat.

Extraordinary achievement

We might think that a creatively original feature or perhaps some revolutionary technology would be needed to attract such a large number of users to the medium. “Extraordinary achievements require extraordinary effort” is the principle we default to. The belief is derived from our daily experience such as going the extra mile in our career, watching Olympics athletes’ grueling training or witnessing an investor making a windfall off a genius idea.
Within that context, Instagram’s meteoric rise feels surreal and almost… unjust. It is making headlines as people stand amazed. “Just where is that extraordinary effort?” we wonder. Did they do something that someone else did not? Are they capable of something their rivals cannot do? While Instagram is a great company, maybe, just maybe being “extraordinary” was never a prerequisite to their achievements.

Who’s who?

In the digital media ecosystem, there isn’t a structure that prevents the mass movement of users between different mediums. Computers and mobile phones can store hundreds of apps which can be downloaded within seconds over high-speed internet. There is virtually no barrier for users to use multiple apps or migrate to a new medium altogether.

For many of us, the discord in our understanding arises from the confusion between the notion of “user” and “customer”. Wikipedia defines “customers” rather eloquently:

“A customer (sometimes known as a client, buyer, or purchaser) is the recipient of a good, service, product or an idea – obtained from a seller, vendor, or supplier via a financial transaction or exchange for money or some other valuable consideration.”

Wouldn’t you agree that companies that advertise on these mediums more aptly fit the definition of “customers”? This becomes apparent when we examine the source of revenue for these mediums.

It might be slightly unpalatable to think that we, digital media users, are “products”. In fact, we created this landscape when we placed our privacy on the altar in exchange for free software and services.

Show me the money

In a stroke of genius, digital media providers such as social media platforms, news sites, instant messaging services and blogs have turned their unwilling customers into products for the advertisement industry. No stone is left un-turned in monetising their user base. These are the 3 major products that you can instantly identify with:

• The user’s presence on the platform is marketed as opportunity for businesses that subscribe to the platform’s advertising facilities.
• The user’s identity such as personal information, geo-location data, friends, and connections are packaged as intelligence that helps companies with their marketing strategy.
• The user’s data that has been uploaded such as photos, videos and music are made available as content for public consumption. New, diverse and entertaining content draws traffic for the advertisements and can be sold for profit.

Awaiting the great migration

Having explained the distinction between users and customers, I believe it plays an important role in deciding the value proposition to both groups. After all “products” do not have the same loyalty to a brand as customers do. Products do not spend money on the company; rather it is the company that spends money to acquire them. For a digital medium, the confusion between the two could result in the misallocation of resources and weaken marketing efforts to attract both users and customers. It affects marketing strategies chosen and the talent hired to lead user and customer acquisition.
Along with the rise of digital media, businesses are investing heavily in digital media for purposes ranging from communications and marketing to sales. Digital media’s ability to connect with a large number of people, especially potential customers, has led businesses to seek higher integration with a particular medium. In fact, there is a whole line of services under the banner of “Conversion Rate Optimisation” which customises marketing activities to suit the medium’s unique demographic.

Before investing deeply in a particular medium, it is important for businesses to assess the stability of a medium’s user base and its expansion plans. It is worth considering the impact of new functions the medium is introducing and its ability to maintain its uniqueness among competitors. Amidst the heavily contested battle for users, large movements of may occur without notice or a medium may slowly grow niche, reducing the returns on investments they have made.

About the Author(s):

Jason Paul is the Head of the Technology Sector at Evant & Co., a management consulting firm with offices in Kuala Lumpur and Jakarta. Our purpose is to help our people and our clients to realise their aspirations while improving lives through business. We advise leaders on strategy, human capital, digital, and outsourcing.