Instagram Gets Big

I left off right around two thousand twelve, after the company had a successful second round of funding for seven million dollars in early and saw its number of users steadily increase, even though the app was only available for iOS at the time. By the end of two thousand eleven, celebrities were in on the game, with folks like Justin Bieber giving the service a huge boost by making their own accounts and sharing their photos with their baby Baby Baby.

In January two thousand and twelve, Instagram made another higher. Philip McAllister joined the company as an engineer. He had previously worked for go Wala, which was a location based social network that got gobbled up by Facebook. And March two more employees joined the company. They were Ryan Gamba, a developer who had founded a business called app That, and Bailey Richardson, a Stanford graduate and community manager who

had previously worked for you Gallery. I mentioned these hires only to point out that Instagram at this phase was still a very small company, despite having a massive installed base. So you had millions of people using the app, but less than a dozen people actually working for the company, and that base got larger in early April of twelve, when Instagram finally launched on Android, you needed a device that was capable of running at least Android two point two,

also known as Froyo. It taken about a year and a half to bring the app over to Google's mobile operating system, and clearly Android users were eager for that app. More than a million people downloaded the app in the first twenty four hours. Instagram would hit fifty million active users in early April, which was a huge jump since

it had only hit ten million the previous September. It's meteoric rise helped the company hold a successful funding round, raising fifty million dollars in investments in the process, which means that's a dollar per active user, which is pretty darn good, and it put the valuation of the company at about five hundred million dollars. Investors included Sequoya Capital, Thrive Capital, Benchmark, and Graylock. And then almost immediately after

that happened came the big news. Facebook had come knocking and System answered the door. The news broke that Facebook would acquire Instagram for the princely sum of one billion dollars in a combination cash and stock deal. The timing of both the funding round and the acquisition announcement meant that it was very likely Instagram was in talks with both groups at the same time. So what the heck was going on here? Well, chances are Sistrom and company.

We're using the investment round as two things, a negotiation tactic and a safety net. The fact that investors were rushing to put more money into Instagram heightened the company's value, which gave Instagram a better position when Facebook was looking to acquire the company. Instagram could point at its recent funding round as evidence of the company's worth and thus demand a higher acquisition price, and the companies that had just invested stood to see a return on those investment.

It's practically overnight if you and poured fifty million dollars into a company and then that company sold for a billion dollars, you would stand to receive a really tidy profit on your investment. And worst case scenario, if the deal broke down and Facebook walked away, you still have fifty million dollars of investment money to work with. At the time of its acquisition, Kevin's Systram owned about forty percent of the company, Mike Kreeger owned about ten percent,

and the rest was owned by their various investors. The one billion dollar deal made them both multimillionaires overnight, at least on paper, they were multimillionaires, with Systram being worth about four million dollars, and there were just thirteen employees at Instagram at the time of the acquisition, and that includes the two founders, So it was a phenomenal deal. However, that would not stop people from later saying Instagram made

the move too quickly. Now, before I get into that analysis, win did Facebook one Instagram in the first place? Well, for one thing, Facebook was heading toward its own initial public offering or i p O. That's when a company switches from being a privately held corporation into a publicly traded one where you can end up trading stocks on

the market. And if an i p O goes well, it earns a company a whole lot of cash, So they become flush with cash they can suddenly do lots of stuff with it, which typically can be used for things like building out resources or acquiring other companies. But Facebook had already found itself in a great position as far as cash goes. Forbes estimated that due to private share sales to Golden and Sacks, which happened in advance of the i p O, Facebook had about four billion

dollars burning a hole in its enormous corporate wallet. Making a move like buying another company before Facebook had its own i p O was a pretty baller move, I guess. For another thing, Facebook really wanted to get at Instagram's

reach with mobile users. Facebook was doing well on desktops and laptops, but hatt't managed to be as successful in the mobile world, and other entities like Google and Twitter were eyeing Instagram to which created a sense of urgency and Facebook needed to find ways to make sure it would remain relevant as demographics and technology changed. Instagram has always skewed younger with its demographics than other social platforms.

A Facebook as a platform started to age out it needed the next big thing to help keep everything moving forward. So why did some analysts later say Instagram made a big mistake selling to Facebook in April In two thousand and fourteen, Business Insider ran a piece about this very question.

By that time, Instagram boasted two hundred million users that put it on parallel with Twitter, which had already held its own I p O and raised two billion dollars in the process, reaching a valuation of more than twenty billion dollars. And then Facebook went on to purchase the messaging service WhatsApp, which was five hundred million users large, and that's about two and a half times the size

of Instagram. But Facebook spent nineteen billion dollars on it in the process, so way more than two and a half times the amount it's it's spent on Instagram. So some analysts have said that Instagram could have held out a little longer, continued working under the investment money it had raised in that fifty million dollar funding round, and watched as its price tag ticked higher and higher. Systrom, for his part, says that it is impossible to see

the future and that playing this game in hindsight is pointless. Rather, he said, the acquisition enabled his team to work on the project that they loved with an enormous amount of support, and without that support, they may never hit that two hundred million user mark, So it could have just been

a moot point, a moot question. When the acquisition became public knowledge, Systrom and Zuckerberg both reassured people that Instagram would continue as its own entity and not be swallowed up into Facebook, incorporated into Facebook's features, and then later disappear,

And so far that has been the case. While Instagram employees celebrate their windfall, the company continued to roll out features, build a larger audience, and generally stay on target until late when a corporate decision would backfire hard on Instagram and cause the company to backpedal a bit. So what happened, Well, it all had to do with those pesky terms of service that we all agree to but almost none of

us ever bother to actually read. I'll explain more in just a moment, but first let's take a quick break to thank our sponsor. In December, Instagram updated its terms of service with the intent for the new policies to

take effects starting January. Among those updates was a sentence that caused a bit of a ruckus, and the sentence read quote, you agree that a business may pay Instagram to display your photos in connection with paid or sponsored content or promotions without any compensation to you end quote, not first blush. That seems to say that if you agree to use Instagram, any or all of your photos could be featured in commercials for products you never use

or you've never heard of, or you oppose morally. And what's more, you would never see a dime in compensation, whether you liked the product or not. The advertisers would get the wealth of countless photographs uploaded to Instagram by millions of users without having to pay anyone other than Instagram for that privilege. Outrage followed, But what was really going on? Well, as it turns out, the terms of service were actually restricting what Instagram could do. Earlier language

was more vague and permissive. But we need to understand a few truths. One of those truths is that companies that display user content require a lot of protection to make sure they can't be held liable if someone says, hey, I didn't want you to share that. The terms of service give broad licenses to such companies. To display images,

because that's what the companies do. Instagram displays the photos you upload and they store them as well, So in order for that to happen, Instagram has to have permission from you to do that because the photos don't belong to Instagram. Those are your photos. Presumably you're presumably uploading your own and not someone else's work, and so to be able to display those images and to store them

on servers, Instagram requires users permission to do so. Instagram can't sell your photos to anyone else because the service doesn't own your photos. I can't sell something that doesn't belong to me, at least not legally. Nor can Instagram change your photos beyond the ways you've indicated. So, in other words, you can use Instagram's tools to change your photos. But once you do that and you've settled on what the photo needs to look like, Instagram doesn't have permission

to change it. Again, it doesn't have a license to create derivative works based off of the images you upload. There are similar terms of service elsewhere online, such as with Google Drive. Without those terms, someone might try to bring a case against a company saying, hey, I only authorize this company to show me my material on this

particular device, nothing more. So some of this is in the interest of self protection, but that didn't mean that Instagram didn't have some wording that concerned poll For example, there was this passage quote to help us deliver interesting, paid or sponsored content or promotions. You agree that a business or other entity may pay us to display your user name, likeness, photos, along with any associated meta data, and or actions you take in connection with paid or

sponsored content or promotions, without any compensation to you. End quote. But the wording stated that Instagram could be paid to allow advertisers to display your content in connection with advertising. Now, as The Verge pointed out in an insightful article on the subject back in two thousand twelve, this actually created limitations for Instagram and advertisers. A sponsor would not be allowed to alter a photo in any way. It would be able to display a photo in connection with advertising,

but couldn't turn the photo itself into an ad. So if you took a picture of a perfect day on a seashore, a nearby resort would not be allowed to display that photo with overlaid text all about the resort. The Verge piece goes on to point out that Facebook already did something akin to this. If you were to like a page on Facebook that was run by a brand that like could show up in friends news feeds

as a sponsored post. So if I liked the podcast page for the soundtrack show, which I recently did do the podcast, could pay Facebook to promote that action across my friends news feeds, and they would see Jonathan liked this page, and that spreads the word and perhaps even inspires my friends to also like that page. The Verge argued that Instagram didn't make a mistake with the way it formulated its terms of service, but rather made a huge mistake by not explaining those terms clearly in advance

so that people wouldn't have a freak count. Instead, users got the opression that all their pictures of vacations, pets, and let's face it, food were to become the ads of tomorrow, and while the users were the ones generating all the content, they wouldn't get paid for it. The reaction was, to put it, lightly negative. Systrom issued a statement apologizing for the communication and the misunderstanding, but at that point the outrage was spiraling out of control, and

so Instagram chose to roll back. The language. Just a little bit later, in December of two thousand twelve, still a month before the policies were even supposed to take effect, the terms of service essentially reverted back to what they were when Instagram first launched, back in which, as the Verge piece pointed out, actually meant that there were fewer protections in place for users, so it ironically got worse,

not better. Another piece, also in The Verge, went so far as to suggest that the whole debacle would feed into a culture of deceit among companies, that instagrams ex arians would encourage other companies to develop terms of service that would be difficult to suss out. They wouldn't be written in plain language in order that people didn't get bent out of shape from the outset, And as the piece pointed out, Instagram's updated policy put their strategy in

plain language. It made it easier to understand, and that's what set people off. When the terms were more obtuse. No one got upset because no one took the effort to understand what the heck the terms meant in the first place. But once you spell it out, everyone got up in arms about it, even though nothing had really changed.

That dramatically. Whether Instagram's experience has had an overall negative impact on the way companies create their terms of services difficult to say, but Instagram did have its first real blush with user blowback, and at first some analysts claimed the move had a real impact on user behavior. There was a company called app Data, which measured Instagram usage through users who had linked their Instagram accounts to their

Facebook profile. Else They reported that the app had seen a twenty decline and daily activity over the week that followed the policy announcements and rollback, but a later statement

from app Data cleared things up. According to a representative, the report was based on inaccurate information and was far more likely to be connected to the fact that the week in question included Christmas and people were just not posting as much that day because they were enjoying a holiday, and that there probably wasn't any direct connection to the policy controversy. Now, while the policy issue was a blip in the radar, Instagram was able to get back on track.

By February of the service boasted one hundred million monthly active users, and while some were starting to whisper that Systram had sold too quickly. System continue to argue that without the support of Facebook, the service wouldn't have grown that quickly. To start with, Now, I've got a little bit more to say about where Instagram is today and how it got there, But first let's take another quick break to thank our sponsor. In two thousand thirteen, Instagram

introduced a few new features. One was photo tagging. Now people could tag one another in photos, and it made it much easier to find photos of yourself with the inclusion of a photos of you tab. That tab displayed all the pictures of a user that other people had uploaded and tagged. Pretty useful when you go to a lot of events and parties with friends and then you want to see how many pictures of you looking like an idiot there are out there. I might be projecting

a little bit. I'm not suggesting that you look like an idiot at parties. I'm admitting that I always do look like an idiot at parties. In June, Instagram introduced video sharing. This seemed to be a response to another popular product that had launched the year before. This one was called vine. Vine would allow users to create video loops that lasted just six seconds and then upload those clips to sites like Twitter, which bought Vine just before

it launched officially. The short form challenged users to find creative ways to leverage that format. Instagram's approach was similar, only it was nearly three times longer, with clips lasting up to fifteen seconds. Instagram also introduced more than a

dozen special filters specifically designed to work with video. This marked the first really big change to Instagram's features since it launched, though the team behind Instagram had been working the whole time to improve services speed and reliability, so it wasn't like they were shirking their duty. They just

hadn't really added any big features. It also meant some people began to worry that Instagram could become Facebook's prototype ground for features that Facebook wanted to explore but couldn't easily implement into the Facebook experience directly. Instead, you just add more stuff to Instagram. Ironically, this would mean pushing Instagram closer to its predecessor, the app known as Bourbon bu r b N. Also, Facebook had really wanted to buy Vine that didn't work out for them, This would

become an ongoing thing for Facebook. Mark Zuckerberg would want to go out and acquire a company, he would get a negative reply, and then he would tell Instagram, hey, can you make a tool that essentially does this thing that we wanted to buy and they'd say okay. In October, Instagram encountered another controversy. This one was one that continued

for a while. A photographer and model named Petra Collins posted a photo of herself in a bikini, and in the photo, some of Collins's pubic hair was actually visible beneath her bikini bottom. Instagram ended up deleting her account, which led to Collins protesting the move, claiming her photo didn't violate any of Instagram's stated terms and conditions, and that led to a wider discussion about Instagram's policies and

the seemingly inconsistent way the company enforced them. You could argue that some photos, while not technically showing any nudity whatsoever, we're incredibly suggestive or sexual in nature, and therefore we're a quote unquote fine by Instagram standards. Other photos that might include a little nudity, but we're not overtly sexual or sensual, might end up being violations of Instagram's policies.

And there were other issues about a disparity between photos of men and women, and this all started to spiral into a big debate online that continues to this day. It's been an ongoing issue for Instagram. There were similar incidents that happened in and there's still arguments about whether or not the policies make sense, whether they are enforced equitably, and whether it's a different story for men than it

is for women. Yet another controversy popped up in November, which must have been a pretty rough year to work in pr and Instagram. A b b See investigative report revealed that people were selling illegal drugs using Instagram to advertise their products, typically with a message that would send people to the WhatsApp messenger in order to complete the transaction. Instagram responded by cracking down no pun intended on the various hashtags being used by people to sell drugs over

the service. Also in two thousand thirteen, Instagram introduced sponsored posts, which would insert advertisements within the feeds of users as a way to monetize the service, and the company also introduced a feature called direct in which users could choose to send photos to specific people as a private message, rather than sharing it in their public feed. This last feature seemed to be a response to apps like Snapchat,

which was growing in popularity at that time. Two thousand thirteen was also the year Instagram finally came to the Windows phone platform. Nakia had been pressuring Instagram for a version of its app to run on Windows Mobile operating system. Nakia's handset division was in the process of being acquired by Microsoft by the time the app was on the verge of launching. The app came out in November, and immediately there were problems. For example, in the beta build,

you could not take photos directly from the app. Instead, you would take photos with your phones camera app, then you would import the photos from your film role into Instagram. Worse, the original announcement mentioned video support, but the Windows Mobile version of Instagram had no such capability. In fact, it would take nearly two and a half years before Instagram

on Windows ten Mobile could support video. There have been some standalone apps that interoperate with Instagram that officially come from Instagram the company. In fourteen, the company launched a messaging app called Bolt, in which users could send an image to other users that disappears after it's been viewed, similar to snapchats design. Later, the company also released hyper Laps, a time lapse video app. In two thousand and fifteen,

Instagram launched a companion app called Boomerang. Boomerang allows users to take a burst of five photos within the span of a second. The photos are then shown in sequence as if they are five frames of a video. Then the sequence reverses back to the beginning and so on in a never ending loop, and it can be funny

or irritating, all depending on the execution. In s, Instagram introduced Stories, which lets you create a series of photos and videos, complete with layers and effects, and string them together to form into a narrative. The story expires after twenty four hours it disappears from feeds at that point. In April, Instagram changed up its algorithm in a way that still drives me crazy, kind of the way Facebook's algorithm drives me crazy. And maybe this is just me.

I know it's not just me, because there's so many articles about it, but maybe it doesn't bother you. But the app changed from listing entries in reverse chronological order. That would be where you have the most recent posts at the top of your feed and older posts are following behind, so you just scroll down and you're seeing

the older posts. Instead, they use a new algorithm in order to show the posts in a way that was supposed to be the kind that would show you more of the type of stuff you really liked at the top. Presumably the algorithm would take into account the people and hashtags of photos that you had hit like on in the past and use that to determine what would rise to the top of your feed, so that you would not miss out on those things, which I guess makes some sort of sense, except it really cuts down on

discover ability. I much prefer the chronological approach, which I think works better as long as you're not following thousands of accounts. If you are following thousands of accounts, then clearly you need some help to see the stuff that you would most likely enjoy away. But if you're like me and you're following maybe a couple hundred of accounts,

then chronological makes perfect sense. That same year, the company faced more controversy when The Daily Star reported that it had discovered users were uploading pornography to Instagram and hiding it through Arabic hashtags and another awful moment came when Olivia Salon um, the senior technology reporter for the U S branch of The Guardian, posted a screenshot of an email she had received, and that email included death and

rape threats against her. That part is awful enough, but the truly terrible part for this story was that the post got a lot of engagement, and Instagram's add algorithm plucked the picture out for use in an advertisement, which appeared on Solon's sisters feed, which is pretty horrifying to see an email addressed to your sister appearing as a

sponsored post in your feed. The purpose behind the agorithm was to help encourage engagement, so if a post was doing well, it's supposed to get featured on your friends feeds so that they don't miss out. But in this case, it seemed as if Instagram was promoting the awful threats against Ms Salon, a very upsetting situation. Also full disclosure,

I should say this. I can't say that I know Olivia Salon, but she and I have interacted online a few times, so I admit I'm not unbiased in this particular story, though I would imagine I'd be horrified even if I had never communicated with her, but that particular problem is indicative of the sort of things that can

happen with algorithms without very careful supervision. And algorithm is just a set of instructions, and if a situation seems to fall within those parameters, the algorithm will act upon it. It's not indicative of anything malicious necessarily, but certainly falls in the problematic or perhaps even negligent categories. And leading up to the recording of these episodes, some more news

about Instagram recently came out. One feature that has yet to be implemented as of the time I'm recording this, but should soon be part of the service is a mute button, which will let you silence friends without actually on following them, so you can see who is bugging you and then you can mute that person. You you would stop seeing photos of my dog Tibolt without having to let me know you've unfollowed me. Though, let's be honest, Tibblet is so darn cute he deserves his own Instagram account.

He's just so darn cute. Instagram is also introducing a feature to let you know when you've seen all the latest posts from the past given amount of time, which would save you the effort of scrolling beyond images you've

seen multiple times in the hopes of glimpsing something new. Now, this would not be necessary if the app, I don't know, listed images and reverse chronological order or something, but it lets you know you've hit the last of the new stuff and that scrolling further will just show you more of what you've already seen. So you start scrolling down and eventually you see a message saying you have seen

all the latest posts from the last six hours. Let's say I'm just arbitrarily making up that time, but you get the idea, and that way you know, all right, well, that's how many were there for the last six hours. I'll check again in a couple of hours and it will tell me when I get to that same spot and say, oh, you've seen the latest ones from the last two hours. And you can keep doing it that way without having to dig way back in your Instagram

feed again. Wouldn't be necessary if it were in reverse chronological order. But I'm beating a dead horse. And another thing that the app is launching is a native payments feature, so you will soon be able to if you if you can already. You soon will be able to register a credit or debit card in a profile. You would then set up a security pen personal identification number, and then you can buy stuff through Instagram. You might be able to do things like make dinner reservations or book

a session in a sheep salon. You may soon be able to buy things advertise on Instagram directly through the app, removing the necessity of navigating away from Instagram to buy those killer shade you saw or whatever. Now again, will these features make Instagram ever more popular? Or are we starting to see that feature creep problem up here, where more and more things that were never part of Instagram's uh makeup back in the old days start getting crammed

in there. Are we going to see Instagram become bourbon the old proto Instagram app from And if it does, will users still enjoy using Instagram or will they say there's so many features here that it's cluttered and it's clumsy, it's not fun to use. I much prefer a streamlined app, and they'll go looking for something else. It's too early

to say for sure. I know that I tend to think that it would be best to keep things as streamlined as possible, and perhaps develop partner apps that have these other features that are starting to creep into Instagram and then go that route instead of putting them all in one. But who am I to say? I'm not worth four million dollars, so I certainly can't argue that I have all the answers. I'm curious what you guys think, and also if you have any suggestions for future episodes,

you should write me your thoughts. The email address is tech stuff at how stuff works dot com, or you can drop me a line on Facebook or Twitter to handle it. Both of those is tech Stuff hs W or also, hey, follow us on Instagram. I've been talking about so much. Just go there, follow tech stuff on There'd be great to see you there, and I'll talk to you again really soon for more on this and thousands of other topics. Because it how stuff works dot com