Facebook stock drops after NY Post botches Instagram story

Facebook shares fell 2.9 percent this morning following a report from the New York Post that Instagram had lost about a quarter of its daily active users. The stock started to recover as outlets began to poke holes in the Post's story, but shares closed down 0.53 percent percent from Thursday. The Post claimed that users were ditching the photo sharing app because of "outrage" over terms of service changes last week. The article cites AppData numbers, pointing out that Instagram peaked at 16.4 million DAU the week it proposed its new policy and then fell to 12.4 million as of Thursday. The Post did not make it clear that AppData counts only users who have connected Instagram with their Facebook account. Many users keep the services separate. In the past we've seen between 20 and 30 percent of Instagram users connecting with Facebook. The majority of Instagram usage is therefore not reflected in the numbers the Post cited. The Post also doesn't say is that the timing of the drop does not line up with when the terms of service issues were raised. The actual decline begins on Dec. 24, but the terms of service questions began on Dec. 17. In fact, Instagram announced that it would revert to its original advertising policy on Dec. 21. What's more likely is that the Christmas holiday led to different usage patterns as people were traveling and experiencing different daily routines. We've seen similar trends among other applications, such as Pinterest, Skype, Pandora and Yelp this week. Instagram also saw a dip in Facebook-connected DAU over Thanksgiving, and that turned out to be a record day for the service. Instagram had 15.1 million Facebook-connected DAU on Nov. 20 and 14.5 million DAU on the holiday Nov. 22, yet Instagram reported that it had the most photos shared in its history that day. Instagram has not revealed how many photos were shared over Christmas, but refuted claims that its usage was declining. "We continue to see strong and steady growth in both registered and active users of Instagram," the company said in a statement.

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Facebook stock drops after NY Post botches Instagram story

Brittany Darwell

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