Apr 24, 2021
This was a hard episode to do. Because telling the story of Instagram is different than explaining the meaning behind it. You see, on the face of it - Instagram is an app to share photos. But underneath that it’s much more. It’s a window into the soul of the Internet-powered culture of the world. Middle schoolers have always been stressed about what their friends think. It’s amplified on Instagram. People have always been obsessed with and copied celebrities - going back to the ages of kings. That too is on Instagram. We love dogs and cute little weird animals. So does Instagram.
Before Instagram, we had photo sharing apps. Like Hipstamatic. Before Instagram, we had social networks - like Twitter and Facebook. How could Instagram do something different and yet, so similar? How could it offer that window into the world when the lens photos are snapped with are as though through rose colored glasses? Do they show us reality or what we want reality to be? Could it be that the food we throw away or the clothes we donate tell us more about us as humans than what we eat or keep? Is the illusion worth billions of dollars a year in advertising revenue while the reality represents our repressed shame?
Think about that as we go through this story.
If you build it, they will come. Everyone who builds an app just kinda’ automatically assumes that throngs of people will flock to the App Store, download the app, and they will be loved and adored and maybe even become rich. OK, not everyone thinks such things - and with the number of apps on the stores these days, the chances are probably getting closer to those that a high school quarterback will play in the NFL. But in todays story, that is exactly what happened.
And Kevin Systrom had already seen it happen. He was offered a job as one of the first employees at Facebook while still going to Stanford. That’ll never be a thing. Then while on an internship he was asked to be one of the first Twitter employees. That’ll never be a thing either. But they were things, obviously!
So in 2010, Systrom started working on an app he called Burbn and within two years sold the company, then called Instagram for one billion dollars. In doing so he and his co-founder Mike Krieger helped forever changing the deal landscape for mergers and acquisitions of apps, and more profoundly giving humanity lenses with which to see a world we want to see - if not reality.
Systrom didn’t have a degree in computer science. In fact, he taught himself to code after working hours, then during working hours, and by osmosis through working with some well-known founders.
Burbn was an app to check in and post plans and photos. It was written in HTML5 and in a Cinderella story, he was able to raise half a million dollars in funding from Baseline Ventures and Andreesen Horowitz, bringing in Mike Krieger as a co-founder.
At the time, Hipstamatic was the top photo manipulation and filtering app. Given that the iPhone came with a camera on-par (if not better) than most digital point and shoots at the time, the pair re-evaluated the concept and instead leaned further into photo sharing, while still maintaining the location tagging.
The original idea was to swipe right and left, as we do in apps like Tinder. But instead they chose to show photos in chronological order and used a now iconic 1:1 aspect ratio, or the photos were square, so there was room on the screen to show metadata and a taste of the next photo - to keep us streaming. The camera was simple, like the Holga camera Systrom had been given while stying abroad when at Stanford. That camera made pictures a little blurry and in an almost filtered way made them loo almost artistic.
After System graduated from Stanford in 2006, he worked at Google, then NextStop, and then got the bug to make his own app. And boy did he. One thing though, even his wife Nicole didn’t think she could take good photos having seen those from a friend of Systrom’s. He said the photos were so good because the filters. And so we got the first filter, X-Pro 2, so she could take great photos on the iPhone 3G.
Krieger shared the first post on Instagram on July 16, 2010 and Systrom followed up within a few hours with a picture of a dog. The first of probably a billion dog photos (including a few of my own). And they officially published Instagram on the App Store in October of 2010.
After adding more and more filters, Systrom and Krieger closed in on one of the greatest growth hacks of any app: they integrated with Facebook, Twitter, and Foursquare so you could take the photo in Instagram and shoot it out to one of those apps - or all three.
At the time Facebook was more of a browser tool. Few people used the mobile app. And for those that did try and post photos on Facebook, doing so was laborious, using a mobile camera roll in the app and taking more steps than needed. Instagram became the perfect glue to stitch other apps together. And rather than always needing to come up with something witty to say like on Twitter, we could just point the camera on our phone at something and hit a button.
The posts had links back to the photo on Instagram. They hit 100,000 users in the first week and a million users by the end of the year. Their next growth hack was to borrow the hashtag concept from Twitter and other apps, which they added in January of 2011.
Remember how Systrom interned at Odeo and turned down the offer to go straight to Twitter after college? Twitter didn’t have photo sharing at the time, but Twitter co-founder Jack Dorsey had showed System plenty of programming techniques and the two stayed in touch. He became an angel investor in a $7 million Series A and the first real influencer on the platform, sending that link to every photo to all of his Twitter followers every time he posted. The growth continued. June, 2011 they hit 5 million users, and doubled to 10 million by September of 2011. I was one of those users, posting the first photo to @krypted in the fall - being a nerd it was of the iOS 5.0.1 update screen and according to the lone comment on the photo my buddy @acidprime apparently took the same photo.
They spent the next few months just trying to keep the servers up and running and released an Android of the app in April of 2012, just a couple of days before taking on $50 million dollars in venture capital. But that didn’t need to last long - they sold the company to Facebook for a billion dollars a few days later, effectively doubling each investor in that last round of funding and shooting up to 50 million users by the end of the month.
At 13 employees, that’s nearly $77 million dollars per employee. Granted, much of that went to Systrom and the investors. The Facebook acquisition seemed great at first. Instagram got access to bigger resources than even a few more rounds of funding would have provided.
Facebook helped them scale up to 100 million users within a year and following Facebook TV, and the brief but impactful release of Vine at Twitter, Instagram added video sharing, photo tagging, and the ability to add links in 2013. Looking at a history of their feature releases, they’re slow and steady and probably the most user-centered releases I’ve seen. And in 2013, they grew to 150 million users, proving the types of rewards that come from doing so.
With that kind of growth it might seem that it can’t last forever - and yet on the back of new editing tools, a growing team, and advertising tools, they managed to hit a staggering 300 million users in 2014.
While they released thoughtful, direct, human sold advertising before, they opened up the ability to buy ads to all advertisers, piggy backing on the Facebook ad selling platform in 2015. That’s the same year they introduced Boomerang, which looped photos in forward and reverse. It was cute for a hot minute.
2016 saw the introduction of analytics that included demographics, impressions, likes, reach, and other tools for businesses to track performance not only of ads, but of posts. As with many tools, it was built for the famous influencers that had the ear of the founders and management team - and made available to anyone. They also introduced Instagram Stories, which was a huge development effort and they owned that they copied it from Snapchat - a surprising and truly authentic move for a Silicon Valley startup. And we could barely call them a startup any longer, shooting over half a billion users by the middle of the year and 600 million by the end of the year.
That year, they also brought us live video, a Windows client, and one of my favorite aspects with a lot of people posting in different languages, they could automatically translate posts.
But something else happened in 2016. Donald Trump was elected to the White House. This is not a podcast about politics but it’s safe to say that it was one of the most divisive elections in recent US history. And one of the first where social media is reported to have potentially changed the outcome. Disinformation campaigns from foreign actors combined with data illegally obtained via Cambridge Analytica on the Facebook network, combined with increasingly insular personal networks and machine learning-driven doubling down on only seeing things that appealed to our world view led to many being able to point at networks like Facebook and Twitter as having been party to whatever they thought the “other side” in an election had done wrong.
Yet Instagram was just a photo sharing site. They put the users at the center of their decisions. They promoted the good things in life. While Zuckerberg claimed that Facebook couldn’t have helped change any outcomes and that Facebook was just an innocent platform that amplified human thoughts - Systrom openly backed Hillary Clinton. And yet, even with disinformation spreading on Instagram, they seemed immune from accusations and having to go to Capital Hill to be grilled following the election. Being good to users apparently has its benefits.
However, some regulation needed to happen. 2017, the Federal Trade Commission steps in to force influencers to be transparent about their relationship with advertisers - Instagram responded by giving us the ability to mark a post as sponsored. Still, Instagram revenue spiked over 3 and a half billion dollars in 2017.
Instagram revenue grew past 6 billion dollars in 2018. Systrom and Krieger stepped away from Instagram that year. It was now on autopilot. Although I think all chief executives have a
Instagram revenue shot over 9 billion dollars in 2019. In those years they released IGTV and tried to get more resources from Facebook, contributing far more to the bottom line than they took.
2020 saw Instagram ad revenue close in on 13.86 billion dollars with projected 2021 revenues growing past 18 billion.
In The Picture of Dorian Gray from 1890, Lord Henry describes the impact of influence as destroying our genuine and true identity, taking away our authentic motivations, and as Shakespeare would have put it - making us servile to the influencer. Some are famous and so become influencers on the product naturally, like musicians, politicians, athletes, and even the Pope. . Others become famous due to getting showcased by the @instagram feed or some other prominent person. These influencers often stage a beautiful life and to be honest, sometimes we just need that as a little mind candy. But other times it can become too much, forcing us to constantly compare our skin to doctored skin, our lifestyle to those who staged their own, and our number of friends to those who might just have bought theirs. And seeing this obvious manipulation gives some of us even more independence than we might have felt before. We have a choice: to be or not to be.
The Instagram story is one with depth. Those influencers are one of the more visible aspects, going back to the first that posted sponsored photos from Snoop Dogg. And when Mark Zuckerberg decided to buy the company for a billion dollars, many thought he was crazy. But once they turned on the ad revenue machine, which he insisted Systrom wait on until the company had enough users, it was easy to go from 3 to 6 to 9 to over 13 and now likely over 18 billion dollars. That’s a greater than 30:1 return on investment, helping to prove that such lofty acquisitions aren’t crazy.
It’s also a story of monopoly, or at least of suspected monopolies. Twitter tried to buy Instagram and Systrom claims to have never seen a term sheet with a legitimate offer. Then Facebook swooped in and helped fast-track regulatory approval of the acquisition. With the acquisition of WhatsApp, Facebook owns four of the top 6 social media sites, with Facebook, WhatsApp, Facebook Messenger, and Instagram all over a billion users and YouTube arguably being more of a video site than a true social network. And they tried to buy Snapchat - only the 17th ranked network.
More than 50 billion photos have been shared through Instagram. That’s about a thousand a second. Many are beautiful...
