It’s fair to say Instagram has dominated news headlines this week, after being acquired by Facebook for an astounding $US1 billion.
With 30 million users on iOS alone, it’s easy to see why Facebook was so keen to get its hands on the photo-sharing app, despite the fact it is yet to generate revenue or turn a profit.
Based in San Francisco, Instagram was founded by Kevin Systrom and Mike Krieger, both of whom are graduates of Stanford University and will now join the Facebook team.
It’s understood the $US1 billion is being paid out with a mixture of cash and stock.
Systrom owns 40% of Instagram, giving him $US400 million, while Krieger holds 10%, with a $US100 million downfall.
These figures aren’t bad for a company that’s only two-years-old, but they haven’t been achieved without hard work and creativity. Here are 10 secrets behind Instagram’s success.
Systrom is one of a growing number of self-taught programmers, and his success highlights the value of learning to code.
Prior to Instagram, Systrom used his evenings to work on simple ideas that would help him learn how to program. One of these ideas was combining elements of Foursquare and Mafia Wars.
“I figured I could build a prototype of the idea in HTML5,” he said.
“At a party… [I met] two people from Baseline Ventures and Andreessen Horowitz. I showed [them] the prototype and we decided we’d meet up for coffee to talk about it.”
“After the first meeting, I decided to take the dive and leave my job… Within two weeks of leaving, I raised $500k from both Baseline and Andreessen Horowitz.”
The Instagram service was not the original concept developed by Systrom, who, after graduating from Stanford, worked on Google’s Gmail and corporate development.
He spent his weekends building an app that allowed location-aware photo and note-sharing, dubbing it Burbn. That’s how Systrom met Krieger, who was an enthusiastic early Burbn user.
While the pair didn’t know each other, they had both participated in Stanford’s Mayfield Fellows program, which educates students in successful and failed start-ups.
In a brave move, Burbn was pared down to photos only and dubbed Instragram.
Unlike a lot of tech start-ups, Instagram has created a platform built on emotion, namely nostalgia, which has a surprisingly powerful effect on consumer behaviour.
For example, there is an Instagram filter called “1977”, which gives pictures a square white border reminiscent of a Polaroid photo, and fades out the colours to suggest the photo has aged.
“[With Instagram], we are creating a kind of instant nostalgia for moments that never quite were,” Ian Crouch wrote in an article for The New Yorker.
Instagram is famously located in Twitter’s old headquarters in San Francisco’s South Park neighbourhood. However, it subleases its space from another company.
Instagram operates out of Twitter’s old conference room – the entire company is nothing more than a collection of desks in a room smaller than most garages, keeping costs to a minimum.
And with only 10 employees on board, questions have been raised as to why Instagram hasn’t gone out and hired more people, although Systrom insists “we only hire the best of the best”.
A small team also keeps Instagram from burning through cash. Fewer staff means fewer paychecks, which means less pressure on the company to generate revenue right away.
While Instagram doesn’t actually make any money, it is not without commercial possibilities.
In addition to a growing and involved user base, the app is catching on with companies, including the Ann Taylor clothing chain, Urban Outfitters Inc. and fashion label Marc Jacobs.
All three of these companies have created Instagram accounts and actively use the service to promote their brands.
The app is also popular with celebrities and politicians, including US President Barack Obama, singer Justin Bieber, professional skateboarder Tony Hawk and rapper Snoop Dogg.
