In Season 4, Episode 3 of Acquired, hosts Ben Gilbert and David Rosenthal are joined by Emily White, former executive at Google, Facebook, Instagram, and Snap, now venture investor and president of Anthos Capital. They revisit Facebook's acquisition of Instagram, a deal pivotal in transforming Instagram from a zero-revenue app to a platform generating nearly a quarter of Facebook's revenue. White shares insights from her time at Instagram, where she was instrumental in developing its business model post-acquisition, and the challenges of integrating and maintaining Instagram's unique identity within Facebook. The conversation also delves into the broader implications of technology acquisitions, the importance of monetization strategies, and the nuanced journey from startup to industry juggernaut.
"On our second episode ever, way back in 2015, we covered Facebook's acquisition of Instagram. And in fact, it's the canonical example of an A plus that we use on our show. So today we'll dive into the integration itself. How Facebook spent a billion dollars to take something from zero revenue to an app responsible for almost a quarter of all of their revenue today."
The quote outlines the episode's theme of exploring the successful integration and business development of Instagram post-acquisition by Facebook.
"So Emily today is a venture investor and the president of Anthos Capital in Los Angeles, but previously in her career was a longtime executive at Google, where she joined very early pre-IPO. She worked with Sheryl Sandberg for ten years, and she then continued to work for Sheryl by moving to Facebook in 2010. And then the topic of today's episode, joined Instagram post-acquisition as their first business executive."
The quote provides a summary of Emily White's professional background and her role in Instagram's business development after Facebook's acquisition.
"So Mark and Facebook find out that Instagram has an acquisition offer on the table from Twitter. Mark had offered to buy Twitter for just about 500 million a few years earlier. And now here is his former acquisition target that is about to buy his current potential future competitor."
This quote emphasizes the competitive nature of the acquisition and the strategic moves made by Mark Zuckerberg to secure Instagram for Facebook.
"It was really the first acquisition that Facebook had done, not just for the people, which are typically called aqua hires. Right. But an acquisition for the people and the company, the underlying product."
The quote highlights the unique nature of the Instagram acquisition, which was not just for talent (aqua hire) but also for the product and company as a whole.
"You know, we've acquired Instagram. They're sitting over in this corner and they're having some challenges on the business side. You should go spend some time with Kevin and there's. There's maybe some opportunity to help him."
The quote points to Emily White's assignment to assist with Instagram's business challenges, indicating the beginning of her significant contributions to the platform's success.
"This was the first. The term unicorn didn't exist. This was a huge moment."
The quote underscores the groundbreaking nature of Instagram's acquisition at the time, marking a turning point in how tech startups were valued and acquired.
"And they rewrote it with a very Facebook frame of mind, which was, we want the ability to use this user generated content in future ads, future ad content."
The quote illustrates Facebook's initial strategy to monetize Instagram's content in a way that was typical for Facebook but not suitable for Instagram's community.
"I had gone over to work on the mobile efforts in 2011, and I think we had one iOS engineer at the time."
This quote emphasizes the lack of focus on mobile development at Facebook during a period when mobile was becoming increasingly important.
"That actually resulted in me. I think I told Kevin twice or three times. No, I just was, you know, I think I need to continue to focus on mobile."
This quote reflects Emily White's initial hesitation to join Instagram due to the perception of it being a less significant opportunity compared to her role at Facebook.
"Yeah, well, the first question is, do you have to make money? Right? And that's the question that we debated with ourselves and with a bunch of people at the company."
This quote captures the initial strategic discussions around Instagram's need to generate revenue and its implications for the company's autonomy and growth.
"So we made that the number one priority, actually. We knew. And we knew, by the way, just looking at what happened with the terms of service, that pissing off our user base was not the way to go."
This quote highlights the importance placed on maintaining a positive user experience and not alienating the Instagram community when introducing ads.
"This was the beginning of realizing what Instagram was inside of Facebook instead of Instagram becoming Facebook."
The quote signifies the strategic effort to maintain Instagram's separate identity and culture within the larger framework of Facebook.
"When Google started, I remember it actually really did not care about making money." "So everyone who showed up at the top, right, had to pay $10. Everyone underneath them had to pay. Was it 1210 and eight set per thousand views?" "Fast forward to Instagram, the technology to do this obviously had sort of already existed, which was wonderful, but we had also moved as a marketplace to be so much more focused on effectiveness."
These quotes reflect the initial lack of focus on monetization at Google and the early CPM model that limited advertiser diversity. They also highlight the evolution towards a performance-driven marketplace by the time Instagram was developing its ad business.
"So what we did was we very systematically went through all of the pieces of Facebook that we could either lean on or build our own." "We knew that we were not building a product that was going to, at least in the short term, compete with Facebook ad dollars." "We decided to do a take a hybrid approach. We leaned on the sales teams really heavily because they had all these relationships that we didn't have to go recreate."
These quotes outline Instagram's strategic decision-making process in building its ad business, the recognition of its unique position compared to Facebook, and the hybrid approach to sales team structure.
"We didn't have anyone to lean on. We had to build it all of ourselves." "When it's an important part, you don't want to outsource it, you want to own it." "We launched the Snapchat. Now, Snap. We built that infrastructure in house."
These quotes emphasize Snapchat's need to independently build its ad infrastructure and the strategic decision to own the ad business due to its importance to the company's future.
"So predicted Instagram to do 14 billion in revenue this year in 2019." "Citigroup had just done a research report on Facebook and estimated the value of Instagram within Facebook at 35 billion at that point in time." "You're saying the enterprise value of Facebook, I'm sorry, of Instagram, is somewhere around $150,000,000,000."
These quotes provide insights into Instagram's financial growth and its significant contribution to Facebook's overall valuation, highlighting the platform's success as an ad revenue generator.
"I don't know where Facebook would be today, honestly." "I think that Mark showed a level of ingenuity in identifying and moving quickly on the Instagram acquisition." "And maybe he would have done it on the next one, I don't know. And been successful with that."
These quotes discuss the strategic importance of Instagram's acquisition for Facebook and speculate on the potential outcomes had the acquisition not occurred, suggesting that Instagram played a key role in Facebook's continued dominance in social media.
"We intentionally maintained the product experience, and that has continued to do very, very well, despite. And in addition to it being part of Facebook, had Twitter bought it? I don't know."
The quote highlights the deliberate choice to preserve Instagram's user experience as a key factor in its continued success, even as part of Facebook, and contrasts it with the uncertain fate it might have had under Twitter's tumultuous management.
"I mean, at that level, if you save or have to spend an extra 500 million, and it would sound so bizarre, but the possibility is so tremendous that it really doesn't matter."
This quote emphasizes the mindset that the potential value and impact of acquiring a startup like Instagram far outweighs the actual cost, even if it's in the hundreds of millions.
"Because if you haven't made any money and you have a billion dollar deal on the table, how could you not say no to? But if you're able to take some money off the table along the way and buy a house, it's easier to keep going and build."
This quote reflects on how the ability for founders to sell a portion of their shares (secondary sales) can provide financial security, affecting their willingness to reject acquisition offers and continue growing their business.
"At that point, they had realized it. Do you remember when Facebook came out with the lot of effort? There were a lot of efforts underway at that company at that point to make sure that it was a mobile first company."
The quote discusses Facebook's realization and efforts to pivot to a mobile-first approach, which was a significant strategic shift at the time of Instagram's integration.
"It felt so much like a startup. And at the same time, we were part of a public company, which then emphasized, at least to me, that we needed to double down on who we were and really make sure that we knew it and that we were defining it for the community."
This quote captures the dual nature of Instagram's existence post-acquisition – operating with the agility and culture of a startup while being part of a much larger public company.
"I think Google did a really nice job with the YouTube acquisition in that they resourced it, they informed it, but they let it fly on its own for a very long time."
The quote praises Google's approach to managing YouTube's acquisition by providing resources yet allowing independence, drawing a parallel to Instagram's strategy within Facebook.
"And you have to remember this is all happening at a time where it was like, do we even need to monetize? And we decided we needed to monetize, but we also needed to grow the product."
This quote discusses the strategic decision-making process at Instagram, where the team had to decide on the right balance between product growth and beginning to monetize the platform.
"Oh, my gosh. I mean, the history is littered with these small decisions that seem so small at the moment."
The quote reflects on how seemingly minor decisions made by individuals can have a significant impact on the future of tech companies, underscoring the influence of people in the industry.
"It's a phenomenal episode and it's a great interview with the guy. I need to listen to the Jack Dorsey interview as well."
This quote points to the growing influence of podcasting as a medium and how it facilitates in-depth discussions with prominent figures, highlighting the shift in media consumption and production.
"It is very worth reading. I can't even describe it other than like, I cannot believe that even in the late 18 hundreds, basically what happened was you read about this in elementary school, in history."
The quote introduces the book "Boomtown" and expresses amazement at the historical events surrounding the founding of Oklahoma City, recommending it as an insightful read.