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Instagram became the first-ever mobile app to achieve a $1 billion valuation.
In 2018, Instagram reached 1 billion monthly users—their second “1 billion” milestone. Soon after, the founders left their jobs. As Systrom and Krieger discovered, even if you reach the highest echelons of business success, you don’t always get what you want.
to fit in in Silicon Valley, he would often note his high school nerd credentials—his video gaming and coding side projects—but rarely mentioned that he’d also been the captain of the lacrosse team or that he was in charge of hyping parties for his college fraternity.
To Dorsey’s surprise, he and Systrom became fast friends. There were only a handful of employees in the loft on Brannan Street, most of them vegan, so he and Systrom bonded over lunchtime walks for sandwiches from the local deli. It turned out that they both had very specific tastes in music and an appreciation for high-quality coffee. They both liked photography. There weren’t many engineers in Silicon Valley Dorsey could talk to about those things. And Systrom flattered Dorsey, who was self-taught, by asking for his help with computer programming.
He was able to know their leaders and understand what drove them, which stripped them of their mystery. From the outside, Silicon Valley looked like it was run by geniuses. From the inside, it was clear that everyone was vulnerable, like he was, just figuring it out as they went along. Systrom wasn’t a nerd, or a hacker, or a quant. But he was perhaps no less qualified to be an entrepreneur.
Hipstamatic, with which you could make your photos look oversaturated, blurred, or hipster vintage, would be named Apple’s app of the year in 2010. Camera+, another editing app, was another one of the most popular. “Well, you guys should probably have filters too,” Schuetz said.
A lot of the good photo-related startup names were taken, so they came up with “Instagram,” a combo of “instant” and “telegram.”
“One day, Instagram is going to be bigger than Twitter,” he predicted, feeling bold. “There’s no way!” Crowley pushed back. “You’re crazy.” “Think about it,” Systrom urged. “It’s so much work to tweet. There’s a lot of pressure about what you’re going to say. But it’s so easy to post a photo.”
Most Silicon Valley startups—more than 90 percent of them—died.
It was the first case of an ambiguous advertisement on Instagram. Who paid Snoop to promote the drink? Or was it something he decided personally to endorse? Did it comply with advertising disclosure rules, or rules against marketing alcohol to minors? Nobody knew, and nobody asked.
The company was pushing faster, sleeker versions of the app to iPhones so frequently—once every couple weeks—that Sweeney didn’t have time to write a detailed description of what was new for the Apple app store. It would be too technical, anyway. He came up with a catch-all explanation, that other Silicon Valley apps would start borrowing: “bug fixes and performance improvements.”
Besides the bullies in Instagram comments, there were others posting graphic photos of their suicide attempts, or passing around images of child nudity or animal abuse, or posting #thinspiration content—the kind that glamorized anorexia and bulimia. Systrom and Krieger didn’t want any of this to be on Instagram and knew, as the site got bigger, that they wouldn’t be able to comb through everything to delete the worst stuff manually. After just nine months, the app already hosted 150 million photos, with users posting 15 photos per second.
When there are competing visions at the top of a company, the executives often fight for recognition of their own relevance and impact, getting in the way of doing what’s best for their consumers. This is what Twitter employees observed in their management. Costolo wanted to assert himself as CEO, but Dorsey was the founder, and so they jostled for the spotlight.
“I’m going to be fired,” he explained. He knew it in his bones. “Nobody does a meeting at eight a.m. in Silicon Valley.”
“Zuckerberg has promised me that he will let us run Instagram like a separate company,” Systrom said. “Do you believe that?” Anderson asked skeptically. He’d seen enough buyers say whatever they needed to say to get a deal done, then renege later. “Yes,” Systrom replied. “Yes, I really do believe that.”
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.
The Instagram deal had been approved near a historic low for the stock. The final cash and stock price Facebook recorded for Instagram is $715 million—not the $1 billion number that made all the headlines.
Everyone knew that their next raise would hinge on whether they affected growth and sharing. They weren’t held accountable for much else.
Instagram was told that the recipe for growth at Facebook—sending notifications and reminder emails, clearing sign-up hurdles, understanding the data, playing defense—was the most important thing to learn if they wanted the app to be truly important one day. It was also the thing that, if implemented badly, could completely kill the good vibes Instagram had going with its community.
“We’re looking to have a level of impact on the world that is unmatched by any other company, and in order to do that we can’t sit around and act like we’ve made it. We need to constantly remind ourselves that we haven’t won and that we need to keep making bold moves and keep fighting or we risk peaking and fading away.” —MARK ZUCKERBERG, QUOTED IN THE FACEBOOK EMPLOYEE HANDBOOK
Once they were together in person, Zuckerberg abandoned the flattery and went straight to threats. He spent the meeting insinuating that Snapchat would be crushed by Facebook unless they found a way to work together. He was about to launch Poke, an app that would allow people to send disappearing photos, just like they did on Snapchat. He was not afraid to completely copy their product, putting all of the power of Facebook behind making it a success.
Instagram was operating so separately, Facebook barely considered it part of the strategy. Whatever progress Instagram made would barely count, unless it helped Facebook too. But they would collaborate. The Instagram team was small, so they’d ask Facebook for introductions in countries they didn’t have staff. Other times, Facebook would lean on Instagram’s relationships, encouraging celebrities, when posting on Instagram, to click the option to allow the post to appear on Facebook simultaneously.
“Facebook buying Instagram was like putting it in a microwave. In a microwave, the food gets hotter faster, but you can easily ruin the dish.” —FORMER INSTAGRAM EXECUTIVE
Even with more users than Twitter, and almost a third of Facebook’s users, Instagram had fewer than 200 employees, compared to more than 3,000 at Twitter and more than 10,000 at Facebook.
Soon, Instagram’s investment in data and analytics would help illuminate something important. It turned out that the high pressure to demonstrate a perfect life on Instagram was actually bad for the product’s growth. And it was great for a now-formidable competitor: Snapchat.
“Rivalry causes us to over-emphasize old opportunities and slavishly copy what has worked in the past,” venture capitalist and Facebook board member Peter Thiel wrote in his 2014 book Zero to One, which Systrom asked all his managers to read. “Competition can make people hallucinate opportunities where none exist.”
When Instagram ran blind tests, users liked the algorithmic version more; when told it was algorithmic, they said they preferred the chronological version.
impulsive. Spiegel hated product testing, product managers, and optimizing for the data—basically everything that had made Facebook successful.
“Facebook was like the big sister that wants to dress you up for the party but does not want you to be prettier than she is.” —FORMER INSTAGRAM EXECUTIVE
In the three months prior to the election, the top stories with false information reached more people on Facebook than the top stories from legitimate news outlets.
Trump’s campaign had a total of 5.9 million different versions of his ads, compared to Clinton’s 66,000, in a way that “better leveraged Facebook’s ability to optimize for outcomes,” the employee said.
Zuckerberg didn’t see the matter in terms of “feel.” He saw it in terms of Instagram stealing Facebook’s opportunity. He told Systrom, over the course of multiple meetings, that he thought Instagram was successful with Stories not because of its design, but because they’d happened to go first. If Facebook had gone first, perhaps Facebook would have become the destination for anyone who wanted that kind of ephemeral experience. And that might have actually yielded a better outcome for the overall company. Facebook, after all, had more users and a more robust advertising operation.
With Instagram’s biggest problems in Facebook’s hands, he had the luxury of avoiding blame. Instagram’s advertising, including all the ads from Russia, was run through Facebook’s self-service system. Facebook’s operations team was in charge of scanning all the rule-breaking content, including on Instagram. Jackson Colaço and a couple others stepped in to help Facebook with its investigation whenever Facebook asked. But mostly, for the Instagram employees, ignorance was bliss.
In May 2017, in a widely publicized study, the Royal Society for Public Health in the U.K. named Instagram the number one worst app for mental health for youth, specifically because it drives people to compare themselves to one another and fosters anxiety.
“These feelings can promote a ‘compare and despair’ attitude in young people. Individuals may view heavily photo-shopped, edited or staged photographs and videos and compare them to their seemingly mundane lives.”
When the Senate committee posted the report stating that Instagram was just as much a hotbed of Russian misinformation as the rest of the internet, the media spent a day writing about it, and then moved on. The Senate asked for no extra testimony. People liked using Instagram.
Now Zuckerberg let the public know exactly how much he thought they deserved. “We believe Instagram has been able to use Facebook’s infrastructure to grow more than twice as quickly as it would have on its own,” he said. The 1 billion user milestone was “a moment to reflect on how this acquisition has been an amazing success” not just for Instagram, but for “all the teams across our company that have contributed.”
Instagram had long been able to scoff at Facebook’s growth tactics, because Facebook had made growth easy for them. Ironically, in an act of competitive defiance against their own parent company, they ended up doing what Facebook had always advised.
“Remember that conversation from earlier this year?” Systrom said to Cox. He’d asked for resources, independence, and trust. “None of the things I asked for have happened.”
Hidden in the bland statement were two symbolic gestures. There was no mention of Zuckerberg. And they referred to Instagram as a separate company, which it had not been for six years.
Systrom and Krieger weren’t at the party. Systrom hadn’t even been posting on his Instagram account. Actually, he’d been un-posting. The picture taken on the couch in his home with Krieger and Adam Mosseri, to signal a friendly transfer of power, no longer appeared on his feed.
Zuckerberg says that Facebook now spends more on “integrity” issues than Twitter makes in annual revenue.
