Dusseldorf’s Institute of Competition Economics (DICE) has just published a new paper on Total Consumer Time. It contains some interesting ideas regarding how best to measure consumers’ engagement with platforms where they might not pay any direct cash price to use the service – a common feature of digital platforms.

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One part of the paper did catch my attention in particular: a case study involving Instagram Reels and Zalando. Reels is Instagram’s competitive response to the overwhelming global success of rival social networking site Tiktok. The paper contains the results of an econometric study which shows that the launch of Reels reduced click-throughs on Zalando adverts carried by Instagram. The paper argues that Reels was so successful at engaging consumers’ attention, that it diverted attention away from Zalando content.

The authors propose the following conclusion:

“While … no apparent efforts have been made by Instagram to actually steer users towards certain offerings or away from others through Reels, the effects illustrate the sheer power of attention platforms to do exactly this if they wish. As Reels have increased TCT on Instagram, users have given less attention to alternative content such as Zalando advertising. Hence, concerns about TCT are not only a theoretical or hypothetical concern, but TCT already has practical business implications today. The results therefore illustrate and underline the potential of attention markets (or platforms) to steer consumers towards some offerings and away from others. The cross-market market power that attention platforms possess results in considerable steering power in their favour”

Reader, this was me:

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Ok, let’s start at the beginning. Tiktok has been a blistering success. Here’s Ronnie with the data:

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Warning: you may need to familiarise yourself with the coincidance Tiktok dance craze to fully process these data.

Instagram Reels is a direct competitive response to this success, offering the same sort of new functionality to users and often carrying identical content. Influencers – who have enormous following and drive a huge proportion of user engagement – frequently participate in both platforms, and post the identical short videos to both sites.

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So what was going on with this not-apparently-intentional-steering? That’s right. It was competition. In fact, in an environment where user-facing prices are zero, it was exactly kind of competition we would expect to see: competition on the quality of the service. Improving the user experience in a bid to retain or attract them from rival services.

Any kind of competition that aims to improve user experience will inevitably attract their attention and engagement. If it doesn’t, it won’t be very competitive.

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Users find content more engaging than adverts. Giving more space on a platform over to better and more engaging content will likely come at the cost of advertising revenue. This is at the very heart of the business model for a platform like Insta. It’s a trade-off, make the content and experience great and you earn the right to put ads in front of eyeballs. But overdo it on the ads (or underdo it on the content and experience) and customers will switch off. It’s no different than the trade-off faced by ad funded TV channels.

So what we are seeing with Reels is exactly what competition does – drives an improvement in the product for users at the expense of the firm. Here Insta offers up better content and experience, and users spend a little less time looking at ads. But the trade-off is worth it, because the alternative is losing a whole bunch of users to a rival.

The idea that this is demonstrative of some sort of market power via ‘steering’ attention doesn’t make any sense to me. Let’s look at that ‘steering’ the strategy from Insta’s perspective:

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I’ll leave the final word to Bernie on this one.

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