Instagram bosses out of picture after Facebook friction
THE founders of Instagram are leaving Facebook after growing tensions with CEO Mark Zuckerberg over the direction of the photo-sharing app, people familiar with the matter said.
The stock dropped 2pc in pre-market trading yesterday.
Kevin Systrom and Mike Krieger, who have been at the company since Instagram's acquisition by Facebook in 2012, had been able to keep the brand and product independent while relying on Facebook's infrastructure and resources to grow. Lately, they were frustrated with an increase in day-to-day involvement by Mr Zuckerberg.
Without its founders, Instagram is likely to become more tightly integrated with Facebook. For years, Mr Systrom and Mr Krieger were able to amicably resist Facebook initiatives that they felt went against their vision, while leaning on Facebook for resources, infrastructure and engineering talent. A new leader may not be able to keep the same balance.
Mr Systrom and Mr Krieger confirmed their decision, although Facebook didn't have a comment on the tension.
"Kevin and Mike are extraordinary product leaders and Instagram reflects their combined creative talents," Mr Zuckerberg said in a statement. "I've learned a lot working with them for the past six years and have really enjoyed it."
Mr Krieger and Mr Systrom built Instagram and sold it to Facebook for $715m six years ago. Then, it had only 13 employees and 30 million registered users. Now more than a billion people use the app monthly, and it is the main source of advertising revenue for Facebook outside its main news feed. A Bloomberg Intelligence analysis in June said it is worth more than $100bn.
"We're planning on taking some time off to explore our curiosity and creativity again," Mr Systrom said on the Instagram blog. "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."
While Facebook has weathered scandals on privacy, fake news and election interference, Instagram's brand has remained mostly untarnished, and continued to add users.
With more than 2.2 billion users, Facebook is running out of people to sign up, and can only push so many ads into its news feed. That means it has become increasingly dependent on Instagram for its future.
Instagram attracts a younger cohort of users who are critical to Facebook's growth. Facebook users also have been flocking to Instagram as an escape, tired of the political bickering and privacy scandals that plague the parent company. Users averaged 53 minutes a day on Instagram in June, just five minutes less than on Facebook.
Instagram is on track to provide Facebook with $20bn (€16.9bn) in revenue by 2020, about a quarter of Facebook's total, Ken Sena, an analyst at Wells Fargo Securities, wrote to investors earlier this year. The company recently launched Facebook Watch, a TV-like platform that it's spent hundreds of millions of dollars on, mostly for content. That was followed by the rollout of Instagram's IGTV, an app that allows anyone to produce and post longer-form videos.
Facebook has started mentioning Instagram more frequently on its earnings calls and taking credit for its success. In the most recent call, Mr Zuckerberg explained that Instagram grew twice as fast being part of Facebook as it could have on its own, a statement that many Instagram insiders felt was unnecessary and unprovable.