Instagram unveils new video service in challenge to YouTube

Facebook's Instagram service is loosening its restraints on video in an attempt to lure younger viewers away from YouTube when they're looking for something to watch on their smartphones.

In this Tuesday, June 19, 2018, photo Kevin Systrom, CEO and co-founder of Instagram, prepares for Wednesday's announcement about IGTV in San Francisco. (AP Photo/Jeff Chiu)

The expansion announced Wednesday, dubbed IGTV, will increase Instagram's video time limit from one minute to 10 minutes for most users. Accounts with large audiences will be able to go as long as an hour.

Video will be available through Instagram or a new app called IGTV. The video will eventually give Facebook more opportunities to sell advertising.

It's the latest instance in which Instagram has ripped a page from a rival's playbook in an effort to preserve its status as a cool place for young people to share and view content. In this case, Instagram is mimicking Google's YouTube. Before, Facebook and Instagram have copied Snapchat — another magnet for teens and young adults.

Instagram, now nearly 8 years old, is moving further from its roots as a photo-sharing service as it dives headlong into longer-form video.

In this Tuesday, June 19, 2018, photo Kevin Systrom, CEO and co-founder of Instagram, prepares for Wednesday's announcement about IGTV in San Francisco. (AP Photo/Jeff Chiu)

The initiative comes as parent company Facebook struggles to attract teens, while also dealing with a scandal that exposed its leaky controls for protecting users' personal information.

Instagram CEO Kevin Systrom told The Associated Press that he hopes IGTV will emerge as a hub of creativity for relative unknowns who turn into internet sensations with fervent followings among teens and young adults.

That is what's already happening on YouTube, which has become the world's most popular video outlet since Google bought it for $1.76 billion nearly 12 years ago. YouTube now boasts 1.8 billion users.

Instagram, which Facebook bought for $1 billion six years ago, now has 1 billion users, up from 800 million nine months ago.

In this Tuesday, June 19, 2018, photo Kevin Systrom, CEO and co-founder of Instagram, prepares for Wednesday's announcement about IGTV in San Francisco. (AP Photo/Jeff Chiu)

More importantly, 72 percent of U.S. kids ranging from 13 to 17 years old use Instagram, second to YouTube at 85 percent, according to the Pew Research Center. Only 51 percent of people in that group now use Facebook, down from 71 percent from a similar Pew survey in 2014-15.

That trend appears to be one of the reasons that Facebook is "hedging its bets" by opening Instagram to the longer-form videos typically found on YouTube, said analyst Paul Verna of the research firm eMarketer.

Besides giving Instagram another potential drawing card, longer clips are more conducive for video ads lasting from 30 seconds to one minute. Instagram doesn't currently allow video ads, but Systrom said it eventually will. When the ads come, Instagram intends to share revenue with the videos' creators — just as YouTube already does.

"We want to make sure they make a living because that is the only way it works in the long run," Systrom said.

In this Tuesday, June 19, 2018, photo Kevin Systrom, CEO and co-founder of Instagram, prepares for Wednesday's announcement about IGTV in San Francisco. (AP Photo/Jeff Chiu)

The ads also will help Facebook sustain its revenue growth. Total spending on online video ads in the U.S. is expected to rise from nearly $18 billion this year to $27 billion in 2021, according to eMarketer.

Lele Pons, a YouTube sensation who also has amassed 25 million followers on Instagram, plans to launch a new cooking show on IGTV in hopes of increasing her audience and eventually generating more revenue. "It's like Coca-Cola and Pepsi," she said. "You will never know what you like better unless you try both."

IGTV's programming format will consist exclusively of vertical video designed to fill the entire screen of smartphones — the devices that are emerging as the main way younger people watch video. By contrast, most YouTube videos fill only a portion of the screen unless the phone is tilted horizontally.

In this Tuesday, June 19, 2018, photo Kevin Systrom, CEO and co-founder of Instagram, prepares for Wednesday's announcement about IGTV in San Francisco. (AP Photo/Jeff Chiu)

Snapchat began featuring vertical video before Instagram, another example of its penchant for copying rivals.

But Systrom sees it differently. "This is acknowledging vertical video is the future and we want the future to come more quickly, so we built IGTV."

Facebook and Instagram parent company Meta said Wednesday its first-quarter profit more than doubled, boosted by higher advertising revenue and a 6% increase on the average price of ads on its platforms. But its shares dropped sharply in after-hours trading following lukewarm revenue guidance.

Meta Platforms Inc. earned $12.37 billion, or $4.71 per share, in the January-March period. That's up from $5.71 billion, or $2.20 per share, in the same period a year earlier.

Revenue rose 27% to $36.46 billion from $28.65 billion.

Analysts, on average, were expecting earnings of $4.32 per share on revenue of $36.14 billion, according to a poll by FactSet.

For the current quarter, the Menlo Park, California-based company said it expects revenue between $36.5 billion and $39 billion. Analysts are expecting revenue of $38.25 billion for the second quarter, which is higher than the midpoint of Meta's guidance range.

Meta also said it expects its 2024 capital expenses to be higher than anticipated due to its investments in artificial intelligence. It is forecasting expenses in the range of $35 billion to $40 billion, up from its earlier guidance of $30 billion to $37 billion.

The company has been investing heavily in AI and earlier this month unveiled a new set of artificial intelligence systems that are powering what CEO Mark Zuckerberg calls “the most intelligent AI assistant that you can freely use.”

Meta, along with leading AI developers Google and OpenAI, and startups such as Anthropic, Cohere and France’s Mistral, have been churning out new AI language models and hoping to persuade customers they’ve got the smartest, handiest or most efficient chatbots.

“Meta’s earnings should serve as a stark warning for companies reporting this earnings season," said Thomas Monteiro, senior analyst at Investing.com “Even though the company did beat estimates in all top- and bottom-line metrics, it didn’t matter as much as the reported lowering revenue expectations for Q2. This is the exact opposite of what Tesla did yesterday and goes to show that investors are currently looking at the near future with heavy mistrust.”

On Tuesday, electric vehicle maker Tesla reported that its first-quarter net income plummeted 55%. But it said it would accelerate production of new, more affordable vehicles, and on Wednesday its stock rose 12%.

The number of people using Meta's apps, meanwhile, continued to increase, with 3.24 billion users on average for March in its “family of apps” that includes Facebook, Instagram, WhatsApp and Messenger. That's up 7% year-over-year. Beginning this quarter, the company will no longer disclose user figures for Facebook.

Meta had 69,329 workers as of March 31, a decrease of 10% year-over-year. Zuckerberg called 2023 the “year of efficiency" and the company laid off thousands to reduce expenses.

Meta's shares fell 16% in after-hours trading. Meta's stock price has more than doubled over the past year thanks to a rebound in online advertising.

FILE - A Meta Portal Go is displayed during a preview of the Meta Store in Burlingame, Calif., on May 4, 2022. Meta reports earnings on Wednesday, April 24, 2024. (AP Photo/Eric Risberg, File)