No Filter: The Inside Story of Instagram

by Sarah Frier

But if Facebook hustled, they could get this done in a single weekend, without any outside bankers. Zuckerberg wanted to hustle. He was one of Silicon Valley’s greatest chess players, thinking several moves ahead. If Facebook took too long to negotiate, Systrom would start calling his friends and mentors. Zuckerberg knew, from his former employee Cohler on Instagram’s board, that Systrom was close with Twitter’s Dorsey. Zuckerberg didn’t have the friendship advantage. But the faster he made the deal, the less likely Systrom was to call someone who would give advice unfavorable to Facebook—or a counteroffer.

In 2013, venture capitalist Aileen Lee came up with a name for startups with billion-dollar values: “unicorns.” At the time, there were 37. When she wrote an update on the rare breeds in 2015, there were 84. By 2019, there were hundreds. But if it’s a bubble, it hasn’t burst.)

Looking at Instagram’s history of investor financing restored Zoufonoun’s respect for Systrom. Here was a man who just a few years ago had been helping on Google’s deals team, making PowerPoint presentations. He had done all this in just eighteen months.

Usually, when Facebook acquired a company, they found ways to absorb the technology, rebrand the product, and fill some gap in what their own company was capable of. If Instagram was going to be its own product, it broke Facebook’s normal acquisition process, and it wasn’t clear how it would work.

Zuckerberg agreed. He fired off an email to the Facebook board, letting them know what was happening. It was the first they were hearing of the massive deal, which was all but completed. Because Zuckerberg held the majority voting power in the company, the board’s role was merely to put a rubber stamp on his decisions.

Third, Instagram would benefit from Facebook’s entire operations infrastructure, not just data centers but also people who already knew how to do all the things Instagram would need to learn in the future. Fourth, and most importantly, he and Krieger would have independence. “Zuckerberg has promised me that he will let us run Instagram like a separate company,” Systrom said.

The structure of the Instagram acquisition—a company purchased not to be integrated—would become an important precedent in technology M&A, especially as giant companies got even gianter, and small companies like Instagram wanted to find some alternative to competing with them or dying. In the coming years, Twitter would buy Vine and Periscope, keeping the apps separate and the founders in charge, at least for a little while. Google would buy Nest, keeping it separate. Amazon would buy Whole Foods, keeping it separate.

Instagram’s perceived independence at Facebook would help Zuckerberg win some otherwise impossible deals with headstrong founders, especially in 2014, with the chat app WhatsApp and the virtual reality company Oculus VR. But mostly, the Instagram deal would give Zuckerberg a tremendous competitive advantage. One Facebook executive would later reflect on the relative importance of the deal: Imagine an alternate reality, in which Microsoft buys Apple while Apple is still small. That would have been tremendous for Microsoft. And that’s what Facebook got with Instagram.

“If we don’t create the thing that kills Facebook, someone else will. The internet is not a friendly place. Things that don’t stay relevant don’t even get the luxury of leaving ruins. They disappear.”

As time passed without any explanation from Systrom, Dorsey stopped feeling hurt and started feeling angry. He realized Systrom had never wanted to sell to Twitter. Twitter had been played. Dorsey deleted the Instagram app and stopped posting altogether.

That’s it, Facebook employees thought as they walked by. That’s a billion dollars in that room. The Instagram team looked afraid.

That day, Zuckerberg had posted a picture of Beast on Instagram—his first time sharing on the app in almost a year.

One of Systrom’s closest friends, the venture capitalist Joshua Kushner, was able to get his firm, Thrive Capital, invested in the latest funding round. Like everyone else, Kushner doubled his money in record time and made a name for himself in the process. So Kushner asked his sister-in-law, Ivanka Trump, to make sure the employees enjoyed themselves. Everyone got to stay in suites in the gold-windowed Trump International Hotel, where they received little personal notes from the heiress, congratulating them.

The DJ congratulated them on the acquisition and lamented that he didn’t have the username he wanted. Jessica Zollman set him up with @Deadmau5 right there at the table.

Systrom and Krieger, on the other hand, were awarded life-changing sums. Krieger solidly owned 10 percent and Systrom 40 percent, and so netted an estimated $100 million and $400 million, respectively, per the original deal price. Systrom was proud; he told friends that the day after the deal, he went into the local deli to buy five copies of the New York Times and was amused that the cashier didn’t recognize him as the man pictured above the fold.

everyone was getting a job with a Facebook-size salary, and everyone would get a bonus of tens of thousands of dollars and more if they worked at Facebook for a year. (When the deal was finally approved, some employees—including Zollman and Van Damme—didn’t stay at Facebook long enough to get the bonus. Others, including Amy Cole, McAllister, and Dan Toffey, remain at the company as of this writing.)

Systrom and Krieger are the only two Instagrammers described as “key employees.” The magic Facebook was paying for was theirs.

The social networking giant’s stock listing captured the public’s imagination after Zuckerberg showed up to meet Wall Street’s suited bankers in his usual zip-up hoodie, providing the ultimate symbol of Silicon Valley hubris. The company went public at $38 per share on May 18, giving Facebook a valuation of more than $100 billion, worth more than Disney or McDonald’s.

Facebook and Instagram presented no obvious consumer harm because their products were free to use, as long as people were willing to give up their data to the network. Facebook’s advertising business was relatively new, especially on mobile phones; Instagram didn’t have a business model at all. Something was a monopoly if it undermined its rivals; Instagram had many rivals. Instagram wasn’t even the first company to make a mobile photo app with filters.

Other apps, like Camera Awesome and Hipstamatic, were downloaded three times more than Facebook Camera, and Instagram was downloaded 40 times more. The argument smartly reframed Facebook as an underdog, trying to compete in a tough new market, as opposed to a giant with 950 million users.

The regulators were shortsightedly looking at the current marketplace and ignoring what Facebook and Instagram had the potential to be in a few years or even months. The real value of Facebook and Instagram was in their network effects—the momentum they gained as more people joined. Even if someone enjoyed using an Instagram competitor like Path more, if their friends weren’t on it, they wouldn’t stay. (Path shut down in 2018 after selling to a South Korean company, Daum Kakao, three years before.) Zuckerberg understood that the hardest part of creating a business would be creating a new habit for users and a group they all wanted to spend time with. Instagram was easier to buy than to build because once a network takes off, there are few reasons to join a smaller one. It

The network effect was also why Facebook would eventually recover from its investors’ panic about making money on mobile. Facebook had millions of users on its mobile phone app—it just hadn’t fully turned on the money machine. Instagram’s network would be lucrative one day too. The way Zuckerberg saw it, as long as there were users, there was a potential to create a business around them—and the more users, the better. Instagram was also a threat to the thing Facebook wanted from its users the most: time on its site. Facebook was in fierce competition with any other network that people would choose to visit in a spare moment—anything that allowed people to see what was going on in other people’s lives and post about their own.

Today, Facebook is still the most dominant social network in the world, with more than 2.8 billion users across several social and messaging apps, and the primary driver of its revenue growth is Instagram. Analysts would later say that approving the acquisition was the greatest regulatory failure of the decade. Even Chris Hughes, one of the cofounders of Facebook, would in 2019 call for the deal to be undone. “Mark’s power is unprecedented and un-American,” he wrote in the New York Times.

Every company that had built its servers with the support of Amazon’s infrastructure—including Pinterest, Netflix, and Instagram—was completely offline due to a storm on the East Coast.

It was the most dire server problem in company history. Instagram was now important enough to be mentioned in every press story about the meltdown, alongside Pinterest and Netflix.

Instagram was reaching a different audience than they were. Facebook required real names; Instagram allowed anonymity. Facebook had re-sharing and hyperlinks; Instagram did not. Facebook was about mutual friendships; on Instagram you could follow people even if they didn’t follow you back.

Instagram was like a constant first date, with everyone putting the best version of their lives on display. On Instagram, people wanted to post things that would attract the adoration of an audience. If an image was beautiful, well designed, or inspirational, it would do well on the app.

Phrases like “outfit of the day” and “food porn” and “Instagrammable” entered the vernacular as the company grew. Nobody said “Facebookable.” Instagram had a higher bar.

It was also Instagram’s job to define itself, in a way that didn’t lean on what was popular. Instagram did have a “Popular” page, which was the only place content was sorted by a computer the way the Facebook news feed was.

Facebook avoided human decision-making around what people saw in their feeds; Instagram loved picking favorites. Everyone they picked would instantly get a bigger audience, becoming a model citizen for others on the app, so the choices were critical. In an ideal world, the suggested user list would be full of people like Drew Kelly.

The word choice was telling: “where it comes across as honest and genuine.” It’s not that Systrom was against people selling products on Instagram. He just wanted them to do it in a way that masked their financial incentives.

When users posted about brands, instead of being so obvious, it would be best if they acted like they were letting their audience in on a life secret, or if they put the product in a spread of other beautiful things, or if they told a story.

They would be called “influencers.” Appearing genuine would be a top priority. But actual honesty would be difficult with so much money on the line.

which needed more visual storytelling. Twitter’s leaders decided that since Instagram was going to be a part of Facebook, it should be treated like a massive competitor—not a scrappy startup. So later that summer, an error message started to appear for Instagram users. They could no longer use the list of people they followed on Twitter to find their friends on Instagram. Twitter’s engineers had blocked Instagram from access to their network.

The new Instagram headquarters was smack-dab in the middle of the Facebook office park, which employees called a “campus,” as if everyone were still in college. Right outside, the word “HACK” was painted on the cement in gray letters so big, passengers flying into San Francisco International Airport could see it from their planes.

He would refuse to give feedback on products unless they were designed first for mobile phones, so the company could catch up to the rest of the industry, including upstarts like Instagram.

Facebook’s users had been addicted to posting every single photo from every single party and vacation, and tagging their friends—which in turn caused all those friends to get emails and little red notification dots luring them back to Facebook.

In practice, the effort was quite literal: to get as many people as possible to use Facebook as often as possible. Every

While Instagram was trying to give people new interests, Facebook was using data to figure out exactly what people already wanted, and then giving more of it to them. Whatever Facebook observed in activity from its users, it could use to define their likes and dislikes numerically, and then adjust those measurements if needed.

Facebook automatically cataloged every tiny action from its users, not just their comments and clicks but the words they typed and did not send, the posts they hovered over while scrolling and did not click, and the people’s names they searched and did not befriend. They could use that data, for instance, to figure out who your closest friends were, defining the strength of the relationship with a constantly changing number between 0 and 1 they called a “friend coefficient.” The people rated closest to 1 would always be at the top of your news feed.

Everyone at the company had access to the whole Facebook code base and was allowed to make changes to the product without much oversight. All they needed to prove was that their edit caused a boost, however small, for some important metric, like time spent on the app.

A few years later, as Facebook’s power grew, its tactics for detecting and paralyzing competitors would come under intense scrutiny. Facebook’s strategy for giving people what they wanted would be accused of addicting the world to the digital equivalent of junk food. Its data collection would spark further panic over privacy. But for now, with the stock down in an era before the public reckoning, Facebook was singularly focused on demonstrating that it could create a viable long-term business, even on mobile phones, proving all the haters wrong.

Instagram wanted things to be carefully considered and designed before they were released to people. Humans, not numbers. Artists, photographers, and designers, not DAUs, the Facebook term for “daily active users.” They didn’t want to limit people to their likes and dislikes; they wanted to introduce them to things they’d never seen before.

One day, Instagram’s growth would inevitably slow, and they would have to understand what enticed their users to spend more time on the app, and what barriers prevented them from coming back. You can thank us later, the growth gurus told them.

One of the earliest examples was in 2006, when the company moved personal Facebook page posts into a public “news feed” overnight without warning, causing a dramatic uproar that eventually subsided when everyone became addicted to the new feature. Over the years, Facebook had learned that people would get mad about breaches of privacy and then forget about them because they actually enjoyed what they were seeing—after all, users were getting exactly what Facebook thought they wanted, based on their previous behavior. Usually, people calmed down. And if they didn’t stop being angry, Facebook could reverse its decisions or come up with a version of the product people weren’t as mad about.

his first ask for Instagram was to allow people to tag each other in photos.

Photo tagging on Instagram was a ZuckPri. It had been such a boost for Facebook in its early days, he was sure that it would work for Instagram.

Instagram got its way, because Zuckerberg had insisted on allowing the division to think independently. As a result, when Instagram introduced photo tagging, it did nothing to boost growth. But using the app remained a pleasant experience, whatever that was worth. And people could now see a helpful record of the pictures they were in beyond their own feeds.

Krieger and Systrom started to understand the strengths of their position: they could learn all of Facebook’s tricks, and then they could understand the pros and cons of those moves by looking at how Facebook’s own product had succeeded or failed. Then, hopefully, they could decide to take a different path if they thought it necessary.

Facebook could also help Instagram grow in new countries by offering its translation tools. Instagram was already translated into a few languages, with the help of superfans who had volunteered in their countries, but Facebook’s system handled many more languages. The decision bothered people like Kohji Matsubayashi, a “language ambassador” in Japan who thought Facebook’s version was lower quality.