SAN FRANCISCO  - Instagram is becoming Facebook’s sugar daddy. The $521 billion social network’s image-sharing unit is a big reason for the company’s strong first-quarter top-line growth. There’s room to wedge more revenue-earning ads into users’ feeds. The risk, though, is the distractions and dodgy content that hamper the “old” Facebook spread to Instagram.

Facebook on Wednesday said revenue jumped 26 percent to $15.1 billion in the first quarter. Mark Zuckerberg can largely thank Instagram for that. It recently added an in-app checkout button for certain brands, with Instagram getting a cut of sales. So-called Stories, which features photos and videos that disappear after 24 hours, are also attracting advertisers. KeyBanc Capital Markets’ analyst believes 50 percent of Facebook’s revenue in 2019 will be driven by Instagram.

The app is also critical to bringing in the next generation of users. Snapchat, Snap's disappearing-messaging service, is the most popular social-media service, according to a recent Piper Jaffray study of 8,000 teens, but Instagram is the most used. Engagement with Facebook’s original eponymous newsfeed is declining, though, and only 6 percent of the teens said it’s their favorite platform.

Yet as Facebook chases Instagram revenue, it risks alienating users who partly like it because it has its own identity. Ads that intrude on the experience, and the possible proliferation of questionable content, could hurt Instagram’s stand-alone brand. Facebook plans to further integrate Facebook Messenger, WhatsApp and Instagram as part of a push to embrace private networks, and that could blur their differences, too.

Facebook has also lapsed on data security, including with Instagram. In March, the company said it had accidentally stored tens of thousands of passwords of Instagram users on its internal data-storage systems, accessible to employees. Last week, it updated that figure to say millions of users’ logins were exposed. That’s hardly appealing to users. It also can have financial costs: Facebook’s first-quarter profit took a hit because of a likely fine from the Federal Trade Commission, related to data-protection violations, that the company said could range from $3 billion to $5 billion.

There have been questions about Instagram’s direction since co-founders Kevin Systrom and Mike Krieger left Facebook last year. As the company’s overall user growth slows, Zuckerberg can’t afford to let his sweetest product turn sour.

CONTEXT NEWS

- Facebook's revenue grew by 26 percent to $15.1 billion in the first quarter of 2019 while net income fell by 51 percent to $2.4 billion compared to the same period in 2018, the company reported on April 24. Diluted earnings per share fell by half to $0.85. The company’s expenses included an accrued cost of $3 billion in relation to a U.S. Federal Trade Commission inquiry into its data practices.

- Monthly active users in the period grew by 8 percent to nearly 2.4 billion.

(Editing by Richard Beales and Martin Langfield)

© Reuters News 2019