In 2012, Facebook purchased a photo-sharing app called Instagram for the staggering sum of $1 billion. By 2019, Instagram was bringing in 25% of Facebook’s annual revenue, which means that one app was earning nearly $20 billion a year. For context, Google’s popular video-sharing platform YouTube was pulling in just $15.1 billion.
How did Instagram get started? And how did it turn into the massive, revolutionary company it is today? Here’s the story behind the photos:
Who Founded Instagram?
Kevin Systrom and Mike Krieger founded Instagram in a San Francisco co-working space on October 6, 2010. Systrom had been working on the project a year earlier under a larger concept called Burbn. When that failed to catch fire, he and his partner peered deeply into the data.
Systrom was born on December 30, 1983 to Diane and Douglas Systrom in Hollister, Massachusetts, which is part of the Greater Boston area. Growing up, Systrom attended the Middlesex School in Concord where teachers introduced him to computer programming. From then on, Systrom dabbled in both video games and computer programs.
In 1997, he left his New England home to study management science and engineering on the West Coast at Stanford University. While at Stanford, Systrom continued his coding hobby and created a student marketplace and an internet radio station. He still DJs on the side.
Systrom wasn’t an ordinary student. He took advantage of his proximity to Silicon Valley and his membership in Stanford’s Mayfield Fellows program to intern at Odeo, the predecessor of Twitter, and then to land a full-time job at Google after graduation. At Google, Systrom worked on several major projects, including Docs, Gmail, Spreadsheets, and Google Calendar.
After a few years, Systrom left Google to work at Nextstop. But like any good entrepreneur, he didn’t stop there. At night, he was still tinkering with engineering concepts. One of these eventually grew into the social check-in service called Burbn.
Mike Krieger entered the world on March 4, 1986 in São Paulo, Brazil. In 2004, he immigrated to the U.S. to enroll at Stanford University. At Stanford, Krieger studied symbolic systems, a field sometimes called computational linguistics. In this field, specialists consider statistical or rule-based modeling of natural language from a computational perspective and research computational approaches to linguistic questions.
Krieger was fascinated with new technology, and he became an early user of Kevin Systrom’s Burbn app. Although the two men didn’t know each other at Stanford, being three years apart, Krieger was also part of the Mayfield Fellows program.
After Krieger got to know Systrom, it was clear that the two men had complementary skill sets. Systrom was a hands-on product visionary, and Krieger could lead an innovative engineering team. They both liked flannel, believed in streamlining their work, and had great rapport with each other. It turned out to be a pairing that would incite one of the world’s great business stories.
Today, Instagram has given Kevin Systrom a net worth of $1.6 billion and Mike Krieger a net worth of $350 million. Systrom married Nicole Schuetz, a Stanford grad who founded Sutro Energy Group, a clean energy investment firm. They have a daughter named Freya.
Mike Krieger is married to Kaitlyn Trigger who leads the philanthropic Future Justice Fund, a grantmaking organization that focuses on income security and criminal justice reform.
Instagram’s Beginnings at Burbn
Kevin Systrom may not have been formally trained in computer programming, but he had the software engineering skills to develop an app. More importantly, he had the business acumen to know the kind of app that people would want to use.
In the early aughts, location-based apps were popular, but photo-sharing platforms were also gaining popularity. Systrom decided to combine the two ideas. He called his app Burbn after his love of fine spirits and bourbons.
The idea got legs when Systrom met two met Andreessen Horowitz and two venture capitalists from Baseline Ventures at a party. Soon, he had $500,000 in seed funding and the ability to hire a team. Systrom started by hiring Mike Krieger who was then working as an engineer for a platform called Meebo.
Burbn Goes Bust
Once on the same team, Systrom and Krieger talked seriously about Burbn and what its possibilities were. The app had potential, they thought, but it was floundering. As creativity researcher Keith Sawyer later wrote, Burbn had “a jumble of features that made it confusing.” The app allowed users to post pictures, make future plans, and hang out with friends. Users found it versatile but confusing. So Systrom and Krieger dove deep into the data. Users were taking advantage of the photo-posting options, they discovered, but weren’t using the location check-in piece. The two entrepreneurs decided to bet big on mobile photos.
Instagram Launches the App
Krieger and Systrom pulled together the power of a social sharing platform with the best of Hipstamatic, a then-popular app that let photographers modify their snaps. The two kept their design to a minimum and focused on the sharing experience. In eight weeks, Krieger and Systrom had a whole new product. They called it Instagram.
After a beta test with friends and some quick revisions, the two entrepreneurs launched their spanking new app on October 6, 2010. That day, it racked up 25,000 downloads. Systrom thought there must be a problem with the count. There wasn’t. Instagram was just that popular.
Early Funding & Growth at Instagram
In a matter of hours, Instagram grew from handful of users to the #1 free photography app. In one week, the app had been downloaded 100,000 times. In two months, Instagram had 1 million users.
Investors took notice, and in January 2011, Krieger and Systrom began meeting with potential funders. In February, the two men had collected $7 million, and Benchmark valued their company at $25 million. In May of 2011, they had four million users and just four employees, including themselves.
Eleven months later, Instagram boasted 27 million users and dozens of employees. Plus, it had landed a $50 million investment. Twitter expressed interest in an acquisition.
Why Was Instagram So Successful Early On?
Kevin Systrom tried building a cool app in Burbn. But it didn’t go very far. The success of the enterprise began when he and Kriege delved deep into the data, learned what customers wanted, and built it for them.
Instagram is fun, simple, focused, and easy. It lets everyone feel successful as a photographer even if they’re first-time amateurs at taking pictures. Instagram succeeded because the product is simple and data driven.
Regarding Instagram’s early success, Kevin Systrom later said, “The thing that I’m learning that has surprised me the most is you have a window of relevance and, unless you reinvent yourself within that window of relevance, you die. I call it ‘success syndrome,’ where you’re successful, you do all the things that made you successful and you keep doing those things thinking that that’s why you’re going to be successful in the future. Things change.”
Facebook Acquires Instagram
Instagram’s growth hardly slowed over time. Shutterbugs everywhere were snapping and sharing photos on the app.
Instagram never made it to Wall Street, however. Facebook stepped in.
Nearly a year earlier, Systrom had declined a generous offer from Twitter CEO Jack Dorsey, whom he knew from the time they both worked at Odeo. Now, however, Facebook was making an offer no one could refuse: $1 billion and a chance for Kriger and Systrom to stay on that company as CTO and CEO respectively. The founders sold the business just before it was set to go public.
The first thing Systrom did after the sale went through? Get a burger.
Instagram Draws Competition from Vine
Disappointed at not being able to acquire the photo-sharing app, Twitter’s Jack Dorsey did the next best thing. He started his own competing product. Dorsey called his new app Vine, and its popularity also soared.
People liked Vine because you could share snappy, six-second videos and not just still photos, which was Instagram’s sweet spot. In December 2015, Vine had swelled to 200 million active users, posing a serious threat to Instagram’s domination. To stave off the competition, Facebook kicked innovation at Instagram into high gear.
How Did Instagram Defeat Vine?
Less than a year after crossing the 200 million user threshold, Vine shut down. Instagram, however, was still going strong. Why?
“We focused on 3 things,” Kevin Systrom explained. “First, simplicity. Simplicity really, really matters here. Video is complex; it’s hard to edit, it’s hard to manage, it’s hard to upload. The second thing: it has to be beautiful. If it isn’t beautiful, it isn’t Instagram. The third thing: community. From day one, 130 million people will have access to recording the world’s video.”
New Product Innovation at Instagram
Kevin Systrom realized quickly that the company’s early success was its greatest threat to longevity. Introducing new products and features before customers clamored for them has helped Instagram stay on top. One of the first decisions the company made was to go from a popular square format to letting users post photos in any ratio. The decision didn’t come easily and had many detractors. Square worked, they argued. Why change? It was an incredible tough and scary decision.
But the change brought even more engagement from Instagram’s users. Looking back, Systrom admitted to Fast Company, “we might have been too precious.” A willingness to change before change was necessary has helped the company stay ahead of its competitors. That growth mindset hasn’t kept all controversy at bay, however.
Instagram Faces Controversy
Rapid growth sometimes meant Instagram wasn’t ready to grapple with the inevitable challenges that came its way.
Hackers found ways to locate private emails and addresses of celebrities using their Instagram accounts. They also hacked into the account of the app’s most-followed user, Selena Gomez, to post nude photos of her ex-boyfriend Justin Bieber.
Other controversies cropped up around the app’s terms of service, privacy policies, and its acquisition by Facebook, which has increasingly drawn fire from regulators and politicians.
Instagram’s Founders Resign
In September 2018, founders Kevin Systrom and Mike Krieger resigned from Instagram. It wasn’t totally unexpected. The two founders of WhatsApp, another Facebook-owned app, had stepped down around the same time.
Of the resignation, Systrom wrote, “We’re planning on taking some time off to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.”
What Does the Future Look Like for Instagram?
Instagram is growing much faster than its parent company, Facebook. And like other Facebook-owned apps, it’s getting wrapped tighter and tighter into what Facebook founder Mark Zuckerberg calls “a family of apps.” Likely, this is Zuckerberg’s way of preventing antitrust regulators from breaking up his company.
Although TikTok and YouTube are nipping at Instagram’s heels, the future looks bright and big enough for all three platforms to thrive. Today, Instagram boasts 500 million daily users and 1 billion monthly users; 25% of businesses maintain Instagram accounts, and 32% of internet users are on the site.
In 2020, eMarketer predicts that the number of monthly Instagram users will increase from 804.4 million to 877.5 million. Influencer marketing, shopping, and IGTV are expected to strengthen on the app especially as Gen Z starts setting up their Instagram accounts.
What Can Small Business Owners Learn from Instagram?
Instagram’s story offers small business owners several lessons in entrepreneurship:
1. Follow the data. When Burbn didn’t work out like they had hoped, Systrom and Krieger took a close, hard look at the facts then acted on what they learned. Instagram didn’t succeed by being a cool app. It succeeded because it let people do something they wanted to do in a simple, easy way.
2. Keep it simple. Everything about Instagram is simple. The concept. The design. The strategy. The founders could explain what their company did in 30 seconds or less so that investors and prospective users could understand it.
3. Pivot early and often. If you wait to change until you have to, you’ve waited too long.
4. Keep your team lean but passionate. Instagram had millions of users before Krieger and Systrom hired more than two people to help them. They didn’t onboard a team because “leading a team” sounded hip and fun. They hired a team only when they needed one. And then they hired the best people they could get their hands on.
Instagram’s story is one of the most remarkable business stories of the 21st century: Two engineering geeks built an app and sold it a couple years later for a billion bucks. It’s especially exciting because almost anyone can do what they did. Even if your idea doesn’t make you a billionaire, you can still build a successful business when you focus clearly, innovate often, serve your customer’s desires over your own interests, and build a team that serves the company before it serves anyone’s ego.
Stephanie is the Marketing Director at Talkroute and has been featured in Forbes, Inc, and Entrepreneur as a leading authority on business and telecommunications.
Stephanie is also the chief editor and contributing author for the Talkroute blog helping more than 100k entrepreneurs to start, run, and grow their businesses.