Into the fold? What’s next for Instagram as founders leave
SAN FRANCISCO—When Kevin Systrom and Mike Krieger sold Instagram to Facebook in 2012, the photo-sharing startup’s fiercely loyal fans worried about what would happen to their beloved app under the social media giant’s wings.
None of their worst fears materialized. But now that its founders have announced they are leaving in a swirl of well wishes and vague explanations, some of the same worries are bubbling up again—and then some. Will Instagram disappear? Get cluttered with ads and status updates? Suck up personal data for advertising the way its parent does? Lose its cool?
Worst of all: Will it just become another Facebook?
“It’s probably a bigger challenge (for Facebook) than most people realize,” said Omar Akhtar, an analyst at the technology research firm Altimeter. “Instagram is the only platform that is growing. And a lot of people didn’t necessarily make the connection between Instagram and Facebook.”
Instagram had just 31 million users when Facebook snapped it up for $1 billion; now it has a billion. It had no ads back then; it now features both display and video ads, although they’re still restrained compared to Facebook. But that could quickly change. Facebook’s growth has started to slow, and Wall Street has been pushing the company to find new ways to increase revenue.
Instagram has been a primary focus of those efforts.
Facebook has been elevating Instagram’s profile in its financial discussions. In July, it unveiled a new metric for analysts, touting that 2.5 billion people use at least one of its apps—Facebook, Instagram, WhatsApp or Messenger—each month. While not particularly revealing, the measurement underscores the growing importance Facebook places on those secondary apps.
Facebook doesn’t disclose how much money Instagram pulls in, though Wedbush analyst Michael Pachter estimates it’ll be around $6 billion this year, or just over 10 percent of Facebook’s expected overall revenue of about $55.7 billion.
Facebook CEO Mark Zuckerberg has long seen Instagram’s promise. At the time, it was by far Facebook’s largest acquisition (although it was dwarfed by the $19 billion Zuckerberg paid for WhatsApp two years later). And it was the first startup allowed to operate mostly independently.
That has paid off big time. Not only did Instagram reach 1 billion users faster than its parent company, it also succeeded in cloning Snapchat’s popular “Stories” feature, dealing a serious blow to that social network upstart and succeeding where Facebook’s own attempts had repeatedly failed. Instagram also pioneered a long-form video feature to challenge YouTube, another big Facebook rival.
Recently, Instagram has been on a roll. In June, Systrom traveled to New York to mark the opening of its new office there, complete with a gelato bar and plans to hire hundreds of engineers. Only a month earlier, Instagram had moved into sparkly new offices in San Francisco. In a July earnings call, Zuckerberg touted Instagram’s success as a function of its integration with Facebook, claiming that it used parent-company infrastructure to grow “more than twice as quickly as it would have on its own.”
But Instagram has also been a case study in how to run a subsidiary independently—especially when its parent is mired in user-privacy problems and concerns about election interference, fake news and misinformation. And especially when its parent has long stopped being cool, what with everyone and their grandma now on it.
Instagram’s simple design—just a collection of photos and videos of sunsets, faraway vacations, intimate breakfasts and baby close-ups—has allowed it to remain a favorite long after it became part of Facebook.