9 years ago, when Facebook bought Instagram for $1 billion, many industry leaders were
skeptical about the decision.
Facebook themselves had just become profitable a few years before that, and they hadn’t
even gone public yet.
So, it didn’t seem very reasonable to spend $1 billion on a photo-sharing app that had
only been around for 1.5 years with a total of 13 employees.
With time, however, Facebook’s decision to acquire Instagram has proven to be a brilliant
business decision as Instagram is estimated to be worth a whopping $100 billion today.
Given that Facebook didn’t create Instagram though, what happened to Instagram’s founders
and why did they leave Facebook in 2018?
Well, starting off with Mike Krieger, Mike was born on March 4, 1986, in Sao Paulo, Brazil.
We don’t really know much about his early life, but it does seem like Mike excelled
in school as he would be admitted into Stanford in 2004.
At Stanford, Mike majored in symbolic systems and he would later meet Kevin Systrom, the
other founder of Instagram, during a fellowship.
When the two eventually started working on Instagram, Mike mainly managed the technical
side of Instagram.
He would fix outages, make sure there was enough server capacity, and so on and so forth.
One time, Mike says that when he woke up in the morning, he saw an email saying that Instagram
had gone down.
He instantly opened up the app to see what was going on, when he noticed that Instagram
was running perfectly fine.
Mike asked Kevin and some early employees if they had fixed the issues, but none of
them had.
Confused, Mike decided to look at the terminal to see who had made the last edit, and it
turns out that Mike had actually woken up at 3:30 AM, fixed the outage, and gone back
to sleep.
Clearly, Instagram’s operations weren’t perfect, but this would all change when Facebook
bought Instagram in late 2012.
Owning 10% of the company, Mike made a total of $100 million from the acquisition.
Assuming that Mike’s payout was proportional to the overall acquisition, Mike received
$30 million in cash and $70 million in Facebook stock.
Facebook decided to keep Instagram a separately run business, so Mike and Kevin maintained
relative autonomy.
But the financial, technological, and human resources they received from Facebook were
invaluable.
After the acquisition, Mike became the CTO of Instagram where he scaled the engineering
team from just 6 general developers to 300 specialized engineers.
One of the first projects that the team worked on after the acquisition was launching a web
browser version of Instagram.
This was one of the first times that a mobile app was translated into a website.
Usually, it was the other way around.
Anyway, later in April of 2015, Mike partnered with a charity organization called GiveWell,
where he donated $750,000.
In 2016, Mike worked on redesigning the app to better match modern UI and design.
And in 2018, Mike worked on launching IGTV.
At this point, it seemed like things were going great.
Mike had a lot of autonomy within Instagram, the app’s user base was growing exponentially,
and Instagram was transitioning from an up-and-coming startup to an established social media player.
Yet, just a couple of months after the launch of IGTV in September of 2018, Mike and Kevin
announced that they would be leaving Instagram and Facebook.
But before we get into that, let’s take a look at Kevin’s side of the story up until
this point.
Kevin Systrom was born on December 30, 1983, in Holliston Massachusetts.
As a kid, Kevin often played a video game called Doom 2 which fueled an interest in
programming.
Kevin would also end up attending Stanford for his bachelor’s, but Kevin majored in
management science and engineering.
While at Stanford, Kevin was selected to take part in the Mayfield Fellows Program which
not only allowed him to meet Mike but also score an internship at Odeo.
If you’re not familiar with Odeo, these are actually the guys who would go on to create
Twitter.
Anyway, Kevin didn’t jump straight into Instagram, or Burbn as it was originally called,
right after college.
In 2006, Kevin actually joined Google as an associate product marketing manager.
At Google, Kevin worked on Google calendar, Gmail, Docs, and Sheets.
A few years into his venture at Google, a couple of his coworkers left the company to
create their own company called Nextstop.
Nextstop was a social travel recommendation site, and Kevin would follow his coworkers
and join the startup.
Kevin didn’t work at Nextstop for too long, but his experience with the startup was essential
in the creation of Instagram.
Fun fact, Nextstop was acquired by Facebook as well in 2010.
After his stint at Nextstop, Kevin would go around silicon valley and pitch his idea for
Burbn to a plethora of venture capitalists.
Andreessen Horowitz and Baseline Ventures would agree to invest $500,000 into the idea
and this allowed Kevin and Mike to get Burbn off the ground.
Initially, Burbn was actually a check-in app that allowed users to share their location,
post pictures, and accumulate points.
However, Kevin soon decided that it was better to just focus on one feature and this led
to the creation of Instagram.
Instagram was a rather trendy launch as the app basically went viral immediately.
Within the first 24 hours, 25,000 people signed up for Instagram and within 9 months, Instagram
boasted a total of 7 million users.
Meanwhile, Facebook’s user growth had stalled and many users had even stopped using Facebook.
So, Mark Zuckerberg made a gutsy move to play it big with Instagram.
Kevin also received an offer from Jack Dorsey as well, but their offer was only half of
Facebook’s offer at $500 million.
Kevin also had plenty of private funding as well which could run the company for years.
But, he felt that support from Facebook would largely streamline the process.
He also didn’t want to lose control though, so he put in a contingency that Instagram
would operate as an independent company.
As we all know, Facebook would agree and Kevin would remain the CEO of Instagram under the
ownership of Facebook.
The acquisition netted Kevin a total of $400 million, and if we assume that the ratio of
cash to stock is the same as the overall acquisition, Kevin received $120 million in cash and $280
million in Facebook stock.
Under Kevin’s leadership, we saw the release of a variety of different filters.
The story goes that Kevin’s girlfriend didn’t want to post pictures from their vacation
to Mexico because she didn’t like the quality of the pictures.
Kevin’s solution to this conundrum was developing filters that would effectively hide the disguise
the quality of the pictures.
Nowadays, this isn’t really that big of a concern considering how advanced smartphone
cameras have become.
Nonetheless, filters have become a staple of Instagram today.
Aside from filters, Kevin also oversaw the release of the explore tab and the monetization
of Instagram.
And in May of 2017, Kevin described how he envisioned Instagram getting involved with
virtual reality products within the next few years.
So clearly, he had no intentions of leaving the company at this time.
Yet, he would do just that a year later.
So what happened?
Well, neither Mike, Kevin, nor Mark have really pointed any fingers at each other publicly.
Mark simply congratulated Mike and Kevin on their success and wished them good luck in
their future endeavors.
Meanwhile, Mike and Kevin simply stated that they were ready to move onto new ventures.
In reality, it seems like there was much more going on behind the scenes.
You see, though Instagram’s autonomy allowed Kevin and Mike to retain control of Instagram
and grow it how they wanted, it also created a divide within Facebook.
A lot of Facebook’s executives felt that Instagram was outshining Facebook and that
Facebook should get more credit for Instagram’s success.
I don’t Mark was part of this group as I think he was proud and happy that he made
a great call with Instagram.
But, he didn’t want to upset the executives that were jealous, so he started to impose
limitations on Instagram and take more credit for Instagram’s success.
In the July 2018 earnings call, for instance, Mark stated quote “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.”
Soon after, Mark asked his head of growth to make a list of all the ways Facebook supported
and boosted Instagram’s growth.
Mark would then go ahead and inform Kevin and Mike that he has to take away all of these
supports in order to protect the Facebook app.
Around the same time, Kevin participated in some magazine profiles, and Mark would go
ahead and ban Facebook employees from participating in magazine profiles without approval from
himself or Sheryl Sandberg who is the COO of Facebook.
Overwhelmed by all of these new rules, Kevin would use paternity leave as an excuse to
take a break from Instagram for a little bit.
But Mark continued to push Kevin’s buttons.
While Kevin was on leave, Mark started testing location tracking on Instagram, something
Kevin was strongly against.
By this point, Kevin became convinced that Mark was trying to make Kevin’s life as
miserable as possible in order to force him to resign.
This was also around the same time that Facebook was involved in the Cambridge Analytica scandal
which just further put off Kevin and Mike.
So, the duo took the hint and resigned from Instagram shortly after Kevin returned from
paternity leave.
Adam Mosseri took over as the new leader of the company, and Instagram has been doing
just fine since then.
However, it does seem like Instagram more or less lost the autonomy that it once had.
Kevin would eventually hint at this tension between himself and Mark by stating “No
one ever leaves a job because everything’s awesome.”
Anyway, since their departure, Kevin and Mike have taken it easy opting to focus on their
families, hobbies, and self-improvement.
The biggest thing the duo has embarked on since leaving Instagram has been rt.live.
The duo launched the website in April of 2020, and the website provided up-to-date data as
to how fast Covid 19 was spreading in each state.
If you go to rt.live now though, you’ll see that the website has been shut down due
to better tracking metrics being available.
And that’s pretty much it from Mike and Kevin.
After the acquisition, the duo took on leading roles at Instagram and made Instagram a leading
social media company.
For many years, Instagram’s expansion was going great.
However, their explosive success ended up being the root of their downfall.
Instagram’s autonomy began to slowly erode, and eventually, Kevin and Mike had enough
and they left the company.
It’s not all bad though.
Since then, they’ve been taking it easy, finally enjoying the wealth they earned years
ago.
Do you guys think Facebook’s acquisition of Instagram was a positive or a negative
long-term?
Comment that down below.
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