Instagram Case
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INSTAGRAM
Story of the innovation
Instagram, as a free online photo sharing application with unique filters and social media networking opportunities, has first been launched by Kevin Systrom and Mike Krieger in October 6, 2010 on Apples App Store. The development of the application first began in San Francisco Silicon Valley, with the attempt of the creators to launch the service application using their HTML5 mobile web application knowledge which they have first started through a check-in project named Brbn. With the inspiration the two owners got from their observations through Brbn that people would actually tend to share more photos on online applications, they decided to evolve the idea into a more specialized and innovative one, which is Instagram. The mobile photography application was first started on launch, with the seed funding $500.000 which was once provided by Baseline Ventures and Andreessen Horowitz in March 2010 while the owners were working for Brbn. Starting from November 2010 after the launch of the application on Apples App Store, new employees as community manager, engineers and community evangelist were started to be hired for the Instagram project, which has become a company by then. It is stated by the owners that it took only 8 weeks to build and ship Instagram, however, it was a product of a year of work.
The co-founders were at working for Brbn at the beginning of their idea generation and innovation stage, which was giving the service of being able to create profiles and sharing location, photographs and interests. However a short time later they found out that this was not yet in an innovation level and to be innovative, their service should be specified and it should have unique aspects. Since the co-founders were young entrepreneurs who wanted to use the changing dynamics and trends of their social environment as an opportunity, they decided that specifying on only creative photography on social media would be an attractive idea for the business to grow. For the improvement of the project, they used the venture funds they have raised in Silicon Valley and the knowledge of the employees that they have hired. The size of the organization was really small, which was made up of the co-founders, an engineers, and the community managers in the small office that took place in San Francisco. When they set up the service application, the idea was transformed into an innovation, while afterwards the users started signing up. The organization did not have a specific business model but was rather dependant on lots of buzz, since it was an effective tool on social media and smart phones.
The company, which offered a photo sharing application with a variety of filters on the basis of social media kept improving its innovations and it continuously came up with new features on the service. In January 2011, Instagram added the “hashtags” feature which created a new approach to the idea of photo sharing, since the sharers could now reach throughout the world for the view of anyone who accesses to the explanatory hastags that they put below their photos. In September 2011, a new updated version of the service application was launched which included new filters and some of the old ones which were estimated as less popular were excluded. The new version also included higher resolution photographs, optional borders, tilt-shift photography features which enabled camera movement and selective focus options, and its icon was updated. On Febuary 2011, with the venture funding collected by a variety of investors in the Series A round of Instagram in Silicon Valley, the company announced that it has raised $7 million. Instagram now had a value around $25 million, which showed its success in a very short time, and its potential to catch up with other social media giants such as Facebook. When the application was released on the Android mobile phones for the first time, it was downloaded for more than one million times on the same day. This situation even aroused its value for the venture capitalists who made $50 million funding as a response to this success, while on April 2012 the value of Instagram reached around $500 million. On the same month, Facebook made an offer to purchase Instagram, which had currently 13 employees by then, for $1 billion in cash and stock, which was also Facebooks largest acquisition deal. The deal was accepted on August 2012 and the company made an official deal with Facebook which acquired the company for $1 billion. The application service was announced to be committed to grow independently by Facebook. By July 2012, Instagram hit 80 million users, which showed its amazingly successful increase of demand since in the beginning of the same year it had 15 million users. More than 4 billion photos were shared since the company was first established. The service is now used by most of the media platforms, agents and celebrities who are reaching the highest amounts of followers by sharing their experiences through the applications. It is used by the most prestigious firms or people such as TIME magazine photographers who are taking the photographs through Instagram, or Obama. Even the presidental election was documented by Washington Post reporters in 2012 through Instagram. In November 2012, the web version of Instagram was launched while the users were given the opportunity to access the service from any web browser rather than only the mobile applications, which targeted increasing the number of users who can more easily access the service. The success of the innovation in terms of historical figures showing the development stage and the rise in number of users can be seen in Appendix 1.
On December 2012, Instagram made a change in its privacy terms which drew the reactions from many of its users, advocates, celebrities like Kim Kardashian and media giants such as National Geographic, since this change granted the firm itself the right to sell the photographs of any of its users to third parties without their notifications and without any compensation. After the heavy outcry from public opinion about the ethical inconsistency and problems about this policy, Instagram was obliged to remove the controversial terms from the conduct. However, this issue costed Instagram the losing of a portion of its users, who reacted as switching to other substitute services. Among these users are Pheed and Flicker, which do not have a market share and user portion and which could not reach the popularity as much as Instagram, but which try to adapt to the new lifestyle of vintage photo sharing and interacting that Instagram has created, by developing Instagram-like features in their applications. These companies found an opportunity to rival with Instagram after the recent incident about changes in terms and conditions of Instagram