Kevin Systrom and Mike Krieger

Instagram has been building incredible momentum over the past few months with new feature roll-outs and additions to the popular photo-sharing platform. But recent news from the company could add to the challenges facing Instagram’s parent company, Facebook. Kevin Systrom and Mike Krieger, the Co-Founders of Instagram, have resigned and plan to leave the company in the coming weeks. The news sent shock waves throughout the social media community who were stunned to learn of the departures.

Systrom, Instagram’s Chief Executive, and Krieger, the Chief Technical Officer, notified Instagram’s leadership and Facebook on Monday of their decision to step down, said people with direct knowledge of the matter. They spoke on condition of anonymity because they were not authorized to discuss the matter publicly. At the time of the announcement, Systrom and Krieger did not give a reason for stepping down but did say they plan to take some time off after leaving Instagram. On Monday, Systrom released a statement and said he and Mr. Krieger were “ready for our next chapter,” and hinted that they would create something new.

 

“We’re planning on taking some time off to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.”

-Instagram’s Chief Executive Kevin Systrom

 

Systrom, 34, and Krieger, 32, have known each other since they met in 2010 when they molded a software project constructed by Systrom into what would eventually become Instagram. The platform now has more than one billion users worldwide and has established itself as arguably the world’s premier social sharing application for photos and videos. Mark Zuckerberg, Facebook’s Chief Executive, had nothing but praise for the Instagram founders in a statement and said that he wished them “all the best and I’m looking forward to seeing what they build next.”

Kevin Systrom and Mike Krieger

Will the departures result in more questions about the future of Facebook?

Before Instagram transformed into what it is today, it was a location check-in app called Burbn. Krieger, a devoted user of Burbn, met Systrom at a Stanford University fellowship program, where they decided to work together. Eventually, Burbn was retooled and renamed Instagram, and it became extremely popular in Silicon Valley almost immediately. Systrom and Krieger pioneered photo filters and camera lenses, in turn catalyzing a wave of impersonators and copycats for the iPhone and Android-based smartphones. The duo worked out of a small office in the South Park neighborhood of San Francisco. In the early years, Instagram spent a lot of money just staying afloat, trying to keep its app online as its servers struggled to keep up with the high volume of user sign-ups.

Eventually, Instagram caught the eye of Mark Zuckerberg, who realized the growing power of Instagram’s photo-sharing network. Zuckerberg saw the wealth of photo-sharing activity across his own social network and visualized the future of what Instagram was capable of becoming. Zuckerberg opened talks to acquire the application and handled negotiations with Systrom and Krieger firsthand.

Facebook then purchased Instagram for $1 billion in cash and stock (though the final cost was closer to $715 million because the stock on which part of the deal was based declined in value). It was Facebook’s biggest acquisition to date and came a month before the social network’s initial public offering. The deal immediately made Systrom and Krieger multi-millionaires. Instagram has since been valued at 100 times that $1 billion acquisition price by Bloomberg Intelligence, making it an ample return on investment. To say the least.

instagram is worth $100 billion

So what really happened?

So why leave a company that is redefining social media as we know it and embark on a new path into uncharted waters? The press release noted that Systrom and Krieger were “ready for our next chapter.” While that may be true, other sources close to the situation state that the departure may be due to growing tensions Systrom and Krieger were encountering with Zuckerberg. Systrom and Krieger had been able to keep the brand and product independent while utilizing Facebook’s infrastructure and resources to grow. However, it’s reported they have been growing frustrated with increased involvement by Zuckerberg in day-to-day operations. Zuckerberg is said to have grown more reliant on Instagram in planning for Facebook’s future. Sources of this information requested to not be identified sharing internal details. With the duo stepping down and leaving the company, Instagram will likely become a more integrated part of the larger company than an independent operation, those same sources said.

For years, Systrom and Krieger were able to amicably resist and push back on certain Facebook product initiatives that they felt went against their vision. All this while still leaning on Facebook for resources, infrastructure, and engineering talent. A new leader may not have the same success in maintaining a similar balance. Nor will they likely have the same independence and freedom to implement that approach. Changes may need to be made at the expense of some of Instagram’s unique qualities in an effort to assist the financial growth of the overall company. Instagram is on track to provide Facebook with $20 billion in revenue by 2020, approximately 25% of Facebook’s total revenue. This is information from Ken Sena, an analyst at Wells Fargo Securities, who shared this information to investors earlier this year.

It will be interesting to see what the future holds for both Instagram and Facebook collectively, now that the founders have stepped away from the company they built from the ground up almost 10 years ago. Facebook certainly sounds like they have their work cut out for them. With a swirling current of inner conflict and tough decisions ahead regarding the direction of the company, it will be worth watching how this news develops moving forward. And where Instagram will settle into the larger Facebook ecosystem.

So, will this Instagram shakeup affect the success of the app or even Facebook itself?

 

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