Instagram: How to go from zero to $1B in under two years

A giant payday is coming for a tiny team that changed the way people share photos.

Co-founders Kevin Systrom and Mike Krieger started out with a straightforward but ambitious mission when they launched Instagram: "To change and improve the way the world communicates and shares."

And now they have done the unimaginable: Gone from zero to $1 billion in just 18 months, as the startup -- valued just last month at an already fat $500 million -- is selling itself to the powerhouse that Mark Zuckerberg built .

The $1 billion figure and the speed to get there sounds ripped right from the headlines of 1999. And the news is sure to have app makers and investors drooling over the possibilities of more giant paydays for app businesses.

But not so fast. Let's not forget that the folks at Instagram did something that so many app makers and consumer startups fail to do: They delighted their users with a product so simple and addictive that it became a viral phenomenon.

I'm not here to argue whether Instagram is worth $1 billion. But Instagram has achieved so much traction -- the *key* ingredient in any consumer play -- that few in the Valley would doubt there would someday be a rich outcome, even though the free photo-sharing app had yet to come up with a business model that would turn all those users into paying customers.

How many users are we talking about? It was a hit from day one. Instagram launched in Apple's App Store on October 6, 2010, quickly leading to tens of thousands of users. ("At the end of the day, it kept growing so much I thought, 'Are we counting wrong?'" Systrom told Inc. Magazine.)

Well, he wasn't, and the downloads kept coming. Today, the app claims 30 million registered users who upload more than 5 million photos every day .

First, the delight: The app is simple and clean. People download it and start taking pictures of whatever they want. They can add filters, and gain followers. Systrom and Krieger tapped into a super powerful part of the smartphone revolution: the reality that we're all carrying powerful cameras with us everywhere we go.

They've embellished the app along the way, but they have also kept it simple -- in the fashion of Apple's late co-founder, Steve Jobs. One key tweak, for instance, came in January 2011, when Instagram added hashtags to help users discover each other and photos.

It also helped a ton that Instragram was an oft-featured app in Apple's App Store. Why Instagram won such love from Apple is unclear, but the result was undeniable. Editors, not software, choose which apps get featured, and winning that spot can turn to app gold. It's the best way to crack through all the noise in an app store with more than half a million offerings.

One Silicon Valley investor, without a connection to Instagram, told me that he's heard an "unverified rumor" that Instagram and Apple had a "secret deal" that, in effect, said Apple would feature Instagram so long as Instagram doesn't develop for Android. If true, it certainly worked out well for the Instagram folks.

"Maybe they sold to Facebook because their growth wasn't as organic as they'd have liked," he said.

If true, that could also explain why Instagram waited until just last week to release an Android version -- an event that led to 1 million downloads on day one.

In the end, one of the most remarkable aspects of this deal is that Instagram is still a team of just a dozen or so employees. A lot of people in the startup world argue that to get really big a company still needs to add a lot of employees. This deal certainly squashes that notion.

 

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