Facebook, Inc. (FB) shares are sliding on the news that the company is losing two pillars of its biggest growth engine Instagram.
Instagram, the photo-sharing app founded in 2010 by Kevin Systrom and Mike Krieger in San Francisco, has been a meaningful, and largely autonomous, part of Facebook since its acquisition in 2012.
As both founders depart, Facebook is feeling the impact as shares slip 2.2% as of 8:27 a.m. in New York. The departure was first reported by the New York Times on Monday.
Instagram has been integral to Facebook's overall story recently, as it is growing towards generating about 15% of the company's revenue and has added 1 billion users to its products, according to J.P. Morgan estimates.
"We believe their departure comes as a surprise given Instagram's success and its growing importance within Facebook," J.P. Morgan wrote in a company note on Monday night. We believe Instagram has been a strong growth driver for FB and has played a critical role in retaining younger users within the group of FB platforms and in competing with (SNAP) ."
Trouble at the Top
The surprise nature of the departures is also adding to speculation in the investor community about dissension in Facebook's ranks.
As TheStreet pointed out, this marks the second major executive departure this year.
WhatsApp co-founder and CEO Jan Koum left his post in April after reports that he and co-founder Brian Acton were at odds with Facebook founder Mark Zuckerberg over Facebook's desire to use the personal data of WhatsApp's 1.5 million daily active users to form targeted ads.
"Facebook's most important acquisitions: Instagram, WhatsApp, Oculus: All key founders have now left or are leaving," John Battelle, the founder of Wired wrote on Twitter, voicing his concern on executive reshuffling.
Investors and advisors are voicing similar concerns. Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management also used Twitter (TWTR) to disparage his chosen platform's biggest rival.
Instagram cofounders resign from Facebook. The wheels coming off the social media giant. We knew social media has topped but this is happening way quicker than expected. $FB
— Ross Gerber (@GerberKawasaki) September 25, 2018
As of the firms's latest 13-F filing, Gerber Kawasaki held 50,739 shares of Facebook.
Pushing Too Hard
Analysts have also pointed to Instagram's growth engine status as a reason for infighting, especially as Facebook relies on its secondary platform to an increasing degree.
"We believe Instagram has been able to use Facebook's infrastructure to grow more than twice as quickly as it would have on its own," Zuckerberg noted in the most recent earnings.
This is in part due to the speed of growth.
"Instagram is growing more quickly and making an increasing contribution to growth," David Wehner said during the same presentation.
The rapid growth has in turn led to pressure to increase ads on the attention-grabbing platform.
"We believe [the departures are] also possibly tied to FB management pushing Instagram hard for both user growth and monetization," J.P. Morgan wrote. "We note that FB and Instagram ad loads are nearly on par with each other."
In the near term, especially as SNAP partners with Amazon (AMZN) , analysts and experts are expecting more pressure to come on Facebook shares in the near term.
