Yahoo Finance Tech Editor Dan Howley explains the backlash against Instagram and how Meta is responding.
BRIAN CHEUNG: All right, well, let's shift gears over to big tech with Meta officially pulling back in early tests to make Instagram look and feel more like TikTok. This moving coming after backlash from some power users like Kylie Jenner that led to a petition to remove the new features. All of this as Meta out with a gloomy outlook for the third quarter in its earnings. Joining us for more on this, Yahoo Finance's Dan Howley. Dan, why the U-turn on Instagram here?
DAN HOWLEY: Yeah, I think, essentially, what's happening here is Adam Mosseri, who is the head of Instagram, kind of just said, look, you got us. We recognize that this rollout was not good. It's very important to note that this was just a test of Instagram's potential future look. This is something that they were rolling out to select users. And unfortunately for them, or maybe they did that on purpose, it landed on Kylie Jenner's phone and Kim Kardashian's phone. And they happen to be some of the largest users of Instagram.
So they obviously have that audience where they can say, hey, this is terrible. We don't want TikTok. We actually wanted Instagram. We want to be able to see photos of friends and family. And, you know, I think that speaks to the broader issue that Meta is going through right now, which is kind of this identity crisis. They see that Gen Z and the younger generation-- I think they call it generation I or something.
But they're moving away from Instagram and Facebook. Look, Facebook is basically a dinosaur to them. They don't even want to look at that. That's like a rotary phone to me when I was a kid. But what they're looking at is how Instagram isn't performing well with them because that was supposed to be their savior.
Obviously, it's not. These people want to move to TikTok. It really is where so many people are kind of getting their social media intake now. They reported they have more than a billion monthly users a while back. That's nowhere near what Facebook's family of apps or Meta's family of apps has, more than 3 billion people. But still, they're getting their lunch eaten by TikTok when it comes to this younger generation. And they need to recognize that what they did originally with Instagram was good.
The ability to see video, to see photos, to see family and friends, that's the kind of stuff that you want to see, not what TikTok offers. They're two definitely different styles of apps. People may appreciate them more because of that. Whereas Instagram is where you go for who you know, TikTok is where you go to see random people-- I don't know-- teach you how to put-- install bathroom tiling. That's what mine does. So it's really kind of these two disparate style apps. Meta just needs to understand that at this point.
AKIKO FUJITA: Dan, I looked this up for you. It's Generation Alpha after generation Z.
DAN HOWLEY: Oh, OK.
AKIKO FUJITA: Anybody born after 2010. But let's go back to what the issue is with Instagram. I mean, yes, we-- we were talking early on this week about what the Kardashians are saying about the platform, but then you could argue that Mark Zuckerberg kind of made it worse by going on that earnings call and saying, look, it's 15% generated by AI right now. And we're going to make it 30%.
How much of this is just simply the fact that they need to find some form of innovation beyond looking at the competitor, who we were talking about this yesterday, that TikTok's got this great algorithm, whatever you think about the platform, that makes the discovery much more fun than what we see on Instagram?
DAN HOWLEY: Yeah, look, I think the problem for them is that they can't buy anyone right now because the FTC will be right on top of them. We just saw that with the VR company Within. So they can't buy the competition. They can't copy the competition. So they're kind of out of ideas at this point because that's what they've been doing for so many years, right? That's what they did when it came to stories and reels when they were stealing ideas from Snapchat and kind of trying to steal their lunch, right?
But now TikTok is just saying, look, we have this idea. We're going to keep running with it. Instagram tried to say, oh, we can do that, too. And everyone was like, no. No, no, no, no. We don't want that. So I think they have to figure out a way to innovate internally. And they're putting a lot of that innovation towards the Metaverse, but their core family of apps, the stuff that actually makes the money and isn't dumping billions of dollars into a bonfire, they're not really innovating with that.
And I think that's something they're going to need to work on going forward. Not just beyond that, the issues with Apple and the privacy changes and, yes, the foreign currency problems they experienced in the quarter. I think big time, they really need to figure out how they can compete better with the likes of TikTok and other up and coming social media apps without just trying to ape them, you know, and failing.
BRIAN CHEUNG: Well, as the saying goes, imitation is the sincerest form of flattery. Yahoo Finance's Dan Howley, thanks so much. Have a great weekend.