Facebook announced Monday that it was going to buy Instagram for $1 billion. The Post’s Hayley Tsukayama looks at what makes the photo-sharing company worth that much money:
Facebook’s $1 billion acquisition of Instagram is a clear sign that Facebook, at least, is taking the rapid shift to mobile platforms seriously. While the social network has one of the most popular apps on the market, the company is still centered around the desktop experience and has admitted that it’s a little concerned about its mobile strategy.
In fact, it paid out twice as much as Instagram’s last estimated value to snap up the photo start-up — possibly because it’s a purely mobile application.
Guy Rosen, the chief executive of Onavo, which monitors mobile data, said the acquisition is “definitely a huge milestone for mobile.” There hasn’t been an acquisition this large of something purely mobile, he said, but the Facebook acquisition recognizes that “Instagram is on to something, on to what it means to be viral,” he said.
Apart from viral appeal, though, Instagram has the loyalty of a growing community of creative people that distinguishes it from other flash-in-the-pan fads such as Color, another photo-sharing app that launched to much fanfare and failed to gain traction, prompting a redesign only months later.
In its two years, however, Instagram has grown on the iOS platform and recently opened its community to Android users. The service now has 30 million users — up from 5 million in June — and the app is the sixth-most downloaded iOS application, according to Onavo’s numbers. That means it shows up on roughly one of every 10 iPhones.
“It’s the most popular social network apart from Facebook and Twitter [when it comes to apps], and the only mobile-only network,” Rosen said. “You can see how Facebook is really trying to address this gap by tapping into Instagram.”
Instagram’s CEO Kevin Systrom may have made out pretty well from the $1 billion deal. VentureBeat.com reports:
Instagram chief executive Kevin Systrom just netted $400 million for selling his two-year-old startup to Facebook for $1 billion.
That’s according to a report by Wired, which cites sources indicating that Systrom holds 40 percent of the company he founded — an impressively large chunk for any entrepreneur at the time of exit, let alone one on his first company.
If true, that amounts to a personal windfall of $725,000 for Systrom for every day since the Instagram app launched on October 6, 2010.
So, how did Instagram come to be? Bloomberg reports :
Systrom also was in the Sigma Nu Fraternity, where he was routinely showing off his design skills, said Tommy Leep, one of Systrom’s fraternity brothers. Systrom produced a video for the frat and worked on a college marketplace that worked like Craigslist, said Leep, who now works at venture firm Floodgate in Palo Alto, California.
“Kevin was a constant tinkerer, always working on interesting technology products,” Leep said. “He was one of those guys that it would just make sense to put a bet on.”
Systrom didn’t respond to a request for comment.
After Stanford, Systrom worked as an intern at podcasting startup Odeo, whose early team included Evan Williams, Biz Stone and Jack Dorsey, the trio who later started Twitter Inc.
He then worked at Mountain View, California-based Google on the Gmail and Google Reader products, as well as in the company’s corporate-development unit. In early 2010, he teamed up with Mike Krieger, a fellow Stanford grad who would become his Instagram partner.
Right off the bat, they raised a $500,000 seed investment from Andreessen Horowitz and Baseline Ventures. They introduced the Instagram application seven months later in October and had almost 200,000 users within the first week, according to a New York Times report at the time.
Bloomberg LP, the parent of Bloomberg News is an investor in Andreessen Horowitz.
By February 2011, membership had soared to 1.75 million, with users uploading 290,000 photos a day. That growth attracted a $7 million investment from Benchmark Capital and prominent angel investors, including Twitter’s Dorsey, Chris Sacca and Quora Inc.’s Adam D’Angelo.
In the next three months, the user base more than doubled to 4 million, all while the company still employed only four people. Systrom said in a May 2011 interview on “Bloomberg West” that “we have many late nights.”
Since then, the number of Instagram users has jumped more than sevenfold.
For those leery about Facebook privacy issues, VentureBeat.com provides five alternatives to the photo-sharing service:
Now that the news of Facebook buying up Instagram has made its way around the Internet, you may be looking for an alternative to the uber-popular photo sharing app. With all of Facebook’s privacy issues, some mobile photographers may shy away from using an app owned by the social network.