Today, Instagram has over 2 billion monthly active users. Its ubiquity has changed the way we travel, eat, and shop. Interior designers have remodelled countless locations to make them more ‘insta-worthy’. Restaurants concoct drinks and dishes, not only to satisfy their customer’s taste buds, but to also look good for their Instagram followers. And millions of people have been elevated to celebrity status — some become personal media companies — purely based on their Instagram followings.
Instagram’s origins may be traced back to the personal life of its co-founder Kevin Systrom. As a junior at Stanford, Systrom built a side project called Photobox — a website that allowed people to upload images for sharing or printing. It was often used at Systrom’s fraternity parties. The website caught the attention of Mark Zuckerberg, an acquaintance of Systrom’s at the time. Zuckerberg asked Systrom if he wanted to drop out and work for TheFacebook.com and build a photo experience beyond the profile picture.
Systrom ultimately said no. There was no guarantee that Facebook would succeed. Besides, he had come to Stanford to get a world-class education, not get rich quick from a startup. In lieu of joining Zuckerberg, Systrom would spend a semester studying abroad at Florence, Italy in 2005.
In preparation for his trip, Systrom bought one of the highest-quality cameras that he could afford. When he showed up at his Florence photography class, his teacher said “You’re not here to do perfection” and put Systrom’s expensive camera in the backroom. Instead, the teacher gave him a Holga camera. It looked like a toy — small and plasticky, it could only produce blurry, square black-and-white photos. Over the next few months, Systrom would snap photos with the Holga, trying to appreciate the blurry, out-of-focus beauty. The idea that a square photo and some editing could transform into art would stick in his head.
The summer after Italy, Systrom interned at Odeo, an internet startup offering a marketplace for podcasts. There, he worked alongside a 29-year-old engineering hire named Jack Dorsey. They quickly became friends, bonding over lunchtime walks and a shared interest in photography.
After his internship but before graduating, Systrom worked as a barista in Palo Alto to earn some extra cash. One day, Zuckerberg walked in and ordered a drink. By then, TheFacebook.com had simply become ‘Facebook’. They had also launched photos in October 2005 without Systrom’s help. That functionality, along with a photo tagging feature launched two months later, propelled the company to more than five million users. Systrom felt a tinge of regret and reached out to one of the employees running product under Zuckerberg, but the person stopped answering his emails.
Around the same time, his former Odeo coworker Jack Dorsey became the CEO of a new product called Twttr (pronounced ‘twitter’). Systrom used the product out of support for his friends and former coworkers, posting whatever he was cooking or drinking, even though the site was text only.
After graduating from Stanford in 2006, Systrom joined Google as an Associate Product Marketing Manager. He wrote marketing copy for Gmail, where the team was trying to figure out how to speed up the email user experience. Eventually the team came up with a solution to load the user’s inbox in the background as soon as the person finished typing their username into Gmail.com, but before they had finished typing their password. This way, the instant the user finished logging in, some of their emails would already be ready to read. The user's internet download speeds didn’t improve but their experience did.
Bored at his job, Systrom left Google in 2009 and joined a startup called Nextstop. He spent his nights and weekends learning to build mobile apps. Systrom made a handful of random tools at first, including a service called Dishd that let people rate specific meals instead of restaurants. Eventually he built something called Burbn — a mobile website that let people share where they were and where they were headed so that their friends could join in. It was pretty basic. People who wanted to attach photos to their posts had to email it in. But it was enough for Systrom to consider quitting Nextstop.
In January 2010, Systrom attended a party for a startup called Hunch. He was looking to make his pitch to the venture capitalists in attendance — eventually meeting with Marc Andreessen of Andreessen Horowitz (a16z) and Steve Anderson of Baseline Ventures. Over the next few weeks, Anderson and Systrom met up and discussed Burbn’s potential. At the time, the app only had a few dozen users, mostly Systrom’s friends and friends of friends. But Anderson was interested, and willing to invest the $50,000 Systrom asked for. There was only one condition: he needed to find a co-founder.
Systrom found fellow Stanford grad Mike Krieger. They first met at Stanford’s entrepreneurship program. Krieger, a Brazilian, fit well with Systrom — he made up for Systrom’s lack of technical expertise as he was a more experienced engineer. As they started to work together, Krieger needed an immigrant work visa under the Burbn company. To the American immigration officials, Krieger’s application looked suspicious. Burbn had raised money, but what was the business plan? Systrom and Krieger didn’t have a clear answer. They knew they wanted users to make Burbn into a daily habit before trying to monetise, but they couldn’t say that. Instead:
They told the government they were one day planning to make money off a kind of local coupon system, for the bars, restaurants, and stores people told their friends they were at. They explained that their competitors included Foursquare and Gowalla. They also provided a chart, which predicted that by their third year, they would likely have 1 million users. They laughed about how improbable that was.
During the wait for visa approval, Systrom managed to convince a16z to put in $250,000. Anderson, the first investor, bumped his investment to match the a16z’s amount. Systrom tried to reach out to other investors, but they weren’t as interested. They thought that Burbn didn’t offer anything new. The location sharing feature was already present at the much more popular Foursquare and Gowalla apps. Burbn’s social networking features didn’t seem as attractive, given that Facebook was already dominant in the space. And Burbn’s status sharing functionality squarely overlapped with Twitter’s. It just didn’t make sense to bet directly against all the popular apps.
Systrom did manage to get one more investor though — his former coworker and mentor, Jack Dorsey. Dorsey didn’t think Burbn made much investment logic, but he trusted Systrom’s good taste and invested $25,000.
After three months of waiting, Krieger’s work visa was approved in April 2010. Burbn now had slightly more than half a million dollars to work with. But on Krieger’s first official work week, Systrom confessed that he wasn’t sure if Burbn was the right product to build. The service resonated with their young hipster friends in cities, but would other people use Burbn? Even Dorsey didn’t use it unless Systrom asked for feedback. A reset would be risky, but Systrom was comforted by Odeo’s experience. After all, he had watched from the outside as his former colleagues successfully switched from podcasting to Twitter.
Krieger was shocked by Systrom’s proposal. Burbn was already a risky venture for him. Pivoting to something else entirely would be an even bigger risk. So they decided to postpone the reset and build out an iPhone app for Burbn first.
A few months later, a meeting with Ronny Conway from a16z reinforced the need to drop Burbn and pivot. Conway was confused and asked “what do you guys do again?”. And when Systrom tried to explain the app, it became clear that Conway wasn’t excited … despite the firm’s investment. To Conway, it seemed like Burbn was just trying to hit all the buzzwords — mobile, social, and location-based. Systrom had experienced this lukewarm reaction before, but Conway’s reaction was the tipping point. He knew Burbn was fun, but what problem did it solve for its users?
Systrom and Krieger decided that they first needed to ask what problem they were solving, and then go and try to solve it in the simplest way possible. They made a list of the top three things people liked about Burbn. It was ‘plans’, prizes, and photos. Plans was a feature that allowed users to share where they were headed so their friends could join in. Prizes was mostly a gimmick feature that rewarded people for logging in and using Burbn. Photos, though, that seemed useful for everyone. Phone photos were horrible at the time, but Systrom believed that it would one day be good enough to make point-and-shoot cameras obsolete.
If they decide to make photos the main feature of their next app, there would be multiple problems to solve. First, images took forever to load on 3G networks. Second, people were embarrassed to share their low-quality phone photos. Third, it was annoying to post photos on multiple platforms. What if there was a way to upload photos to Foursquare, Facebook, Twitter, and Tumblr all at once? This would also allow them to avoid competing directly with the new social media giants. Instead, they would get to ride on the already-established communities. Systrom and Krieger went off to solve these three main problems, and decided to start with an iPhone app. They could always add an Android app later, if they were lucky enough to grow that popular.
Their first prototype was called Scotch. It allowed people to swipe through photos horizontally and tap to like them. They used it for a few days before going back to Burbn, doubting their instincts. Then they moved on to a vertical scroll interface. The most recent photos would be displayed at the top, like Twitter.
Systrom and Krieger solved their first problem — that of slow-loading photos — by lowering the resolution of each photo. They mandated that photos could only be 306 pixels wide. There would be a formatting constraint too — the photos had to be square shaped (like the Holga camera Systrom used in Florence). This would partly solve the second problem of embarrassingly low-quality phone photos.
As they copied Twitter's ‘followers’ and ‘following’ system instead of Facebook’s mutual friend system, Systrom and Krieger debated whether they wanted to add a ‘retweet’ button to their service. It could help photos go viral and allow people to share what they liked, but in the interest of starting simple, they decided to postpone the decision. They would start off with a simple like button first.
While Systrom went on vacation with his girlfriend (and future wife) Nicole Schuetz, she warned that no one would use his new app. Smartphone photos wouldn’t be good enough — Schuetz protested that the photos she took were not as good as their friend’s Hochmuth’s photos. But Systrom said that Hochmuth’s smartphone photos were put through filter apps. These apps enabled users to make their low quality phone photos look more artsy. This was the same year that Hipstamatic, an app that could make photos look oversaturated, blurred, or hipster vintage, won Apple’s app of the year award. In a parallel universe, Hipstamatic might have pivoted to social networking first, beating Systrom to the punch. But in this universe, Systrom’s girlfriend replied that they should probably add filters to the new app too.
(Seven years later, Hipstamatic co-founder Ryan Dorshorst said that it was “weird and sometimes sad” to look back and realise that they played such a major role in the existence of Instagram. But then he said “all great advances are made on the shoulders of those who came before you” — and admitted that Systrom and Krieger were smart in understanding and then exploiting Hipstamatic’s secret sauce. Dorshorst now has an Instagram account.)
Upon returning to his hotel, Systrom researched how to code up a filter. He played with Photoshop for a bit, eventually emerging with ‘X-Pro II’, which he promptly applied to a dog photo. This would be the first-ever photo posted on the app. The date: July 16, 2010.
At this point, Systrom and Krieger were still unsure whether their new app would work better than Burbn. Nothing they’d built was new. They weren’t the first to add photo filters, nor were they the first interest-based social network. But they decided to go ahead and test it on the public. They decided to launch within eight weeks.
Around this time, Chris Sacca of Lowercase Capital approached Systrom and got an app demonstration. Sacca wasn’t sold. “How big can photos really be?” he asked. At this point in time Sacca had already invested in Photobucket, which sold to News Corp for $330 million, and had watched Flickr sell to Yahoo for $35 million.
Systrom was unfazed. Instead, he sold exclusivity: he shared that only two other angel investors were invited into the deal — Jack Dorsey and Adam D’Angelo (the founder of Quora). It worked: Sacca eventually made an angel investment.
As the launch deadline approached, Systrom and Krieger wanted to come up with a name that was easy to pronounce and spell. They wanted it to sound fast. The app had cloned Gmail’s trick by uploading photos in the background while users were still testing out different photo filters. They chose Instagram, a combination of ‘instant’ and ‘telegram’.
At this point, Instagram had a few hundred beta testers, but the co-founders could already tell that the app’s ability to share images to Facebook and Twitter had a powerful side effect. Every time Instagram users shared their photos on different social media platforms, the people on those apps would learn of Instagram and download it for themselves.
On October 6, 2010, Instagram launched to the public. Thanks to people like Dorsey, who would cross-post his Instagram photos to his 1.6 million Twitter followers, the app went viral. On its first day, there were 25,000 people using Instagram. By the end of the week, it was 100,000. Within two months, it would be two million users. It became the number one camera app in the Apple app store.
With the benefit of hindsight, it appears Instagram launched with perfect timing. Smartphones were starting to become mainstream and millions of new users didn’t know what to do with their low-quality phone cameras. But Instagram wasn’t the first nor the only social network that utilised phone photos. Systrom and Kreiger differentiated themselves by keeping their app simple. There was no long list of features and there was no website. It was Facebook that looked cluttered compared to Instagram with its news feed, events, groups, and virtual credits. And while Facebook let people upload mobile photos into their accounts, it would also automatically add the photos to a default album called ‘Mobile Uploads’, relegating the feature to an afterthought. Instagram took advantage of this.
By the summer of 2011, Instagram had reached six million signups, growing twice as fast as Twitter and Facebook. But they were still a much smaller platform. Facebook had more than 800 million users and Twitter had about 100 million.
As Instagram continued growing, its users seemed to ask for a re-share button. It was a decision that Systrom and Krieger had postponed during the pre-launch development of the app. Now post-launch, Krieger had built a re-share button, but decided not to release it. Although they knew that a re-share button would reward users with virality and thus help the app grow, they thought it would violate the expectations users had when they followed someone. Users should follow someone on Instagram to see what they saw, experienced, and created, and not someone else’s posts.
By 2012, it seemed as if Instagram had entered the mainstream. Celebrities like Taylor Swift, Rihanna, and even President Barack Obama had accounts. At the same time, its user base had grown to 30 million.
By this point, Instagram didn’t just catch the attention of celebrities — it caught the attention of Zuckerberg. In early April 2012, Instagram was about to close a $50 million venture round at a US$500 million valuation. The investors were lined up, the legal documents were ready, all Systrom had to do was sign. But before he did, Zuckerberg called.
“I’ve thought about it and I want to buy your company,” Zuckerberg said. “I’ll give you double whatever you’re raising your round at.”
Around this time, Facebook was publicly gearing up for its IPO, causing Zuckerberg to think about the long-term realities of his business. They had successfully built the most popular social network, but users were quickly shifting to mobile devices. Facebook had an app to capture part of that shift, but their position was precarious. They weren’t in the hardware business, which meant his company would be stuck building inside the territory owned by other companies (Apple, Google, Samsung, etc). And they were facing mobile competitors like Instagram and Twitter (which Zuckerberg had already tried to buy in 2008). One solution was to buy Instagram.
Zuckerberg, who had been in Systrom’s position before, met directly with him. In their meetings, Systrom was promised independence. Instagram would still be run as if it was a separate company, but they would get to lean on Facebook’s entire operations infrastructure. There would be fewer growth problems and service outages.
On April 9, 2012 the news went public. Facebook acquired Instagram, with its thirteen employees, for US$1 billion in cash and stock.
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