Earlier quoted context omitted.
It's not a mistake in the short-term, but in the long-term it'll hurt growth. New users will find Instagram confusing and why signup and download an app for 3 different things when you only want one of them?
People will flock in where other people are. Unless Instagram gets a decent competitor, people will just get used to it.
They got everybody and their mom on it and now even with all the security, tracking and countless competitors, its nearly impossible to get people off it because of this simple fact - its where everybody they know are now.