Facebook bought Instagram because he was afraid of Twitter and Google

Instagram has become a key part of Facebook's growth. Facebook bought the photo-sharing start-up for $ 1 billion in 2012, paying what appeared to be a shocking $ 1 billion for a company of 13 employees at the time.

Today, Instagram has more than one billion monthly users, including 500 million daily users of the Stories feature, introduced in 2016 to compete with a popular feature of the same name from Snapchat. Thanks to this growth, analysts have estimated that Instagram is worth more than $ 100 billion, about one-fifth of Facebook's total market capitalization.

As Facebook's power grew, so did the calls for the company to divest Instagram. Facebook's calls for rupture come from co-founder Chris Hughes and Democratic presidential candidate Elizabeth Warren. In August, The Wall Street Journal announced that the FTC was reviewing Facebook's acquisitions as part of an antitrust investigation to determine whether the company had entered into agreements to stifle competition.

Meanwhile, Facebook continues to make strategic acquisitions – the company paid $ 19 billion for the purchase of the WhatsApp courier company in 2014, and Monday the company announced spirits.

In this context, it is worth revisiting the acquisition of Instagram, which launched the company's purchases. Several former Facebook employees who had knowledge of the Instagram acquisition told CNBC that the company had not purchased the mobile application to crush a potential competitor. Former employees argue instead that Facebook was at the time much smaller and withstood the fierce competition of Twitter, which had already bet on Instagram and on the new social network of Google. These people have asked to remain anonymous because they are not allowed to talk about Facebook to the press.

Facebook declined to comment on this article.

Even since the launch of Twitter in 2006, Facebook had considered it as its main competitor. The San Francisco microblogging start-up was the only other real name at the time in social networks, although it had a much smaller user base. By the end of 2011, Facebook had 845 million monthly average users according to its S1 ranking, while Twitter reportedly reported more than 100 million.

The competitive landscape became increasingly chaotic in June 2011 when Google launched a Facebook-related legal campaign with Google+, a critically acclaimed new social network for its innovative privacy and control features. . Google has used its other popular services, such as Gmail, to direct users to Google+ creative and interaction. By the end of the year, Google was claiming 90 million active users per month for the service, according to executives on appeal.

Facebook also had a major internal problem to solve: its strategy for mobile.

Zuckerberg and his company had bet early on a web technology called HTML5, supposed to work on different mobile platforms and not requiring much customization work for each. But it became clear that HTML5 applications did not work as well as applications designed specifically for each platform.

In 2011, Facebook's mobile apps were slow and bloated. These were Frankenstein, said a former employee at CNBC. The company needed to improve its application and move to mobile, where it foresaw future growth.

To optimize the application and evolve on mobile, the company has decided to expand various features to make their own applications. The best known of these derivatives is Messenger, released in August 2011, which allowed Facebook users to chat with each other.

The company also decided to launch a photo application and began working on it in 2011, according to several sources.

During the development of this application, Instagram began to attract the attention of Facebook employees. This included Zuckerberg, who asked his employees to give their opinion on Instagram and what his popularity meant for the way users would interact with the photos on their phone.

Around the same time, as Facebook began to prepare for advertising, Zuckerberg established ties with other promising start-up entrepreneurs. Zuckerberg has spoken with Drew Houston of Dropbox, former Facebook co-founder and CEO of Asana, Dustin Moskovitz, and Kevin Systrom, CEO of Instagram.

Zuckerberg was chatting informally with Systrom over the phone to discuss the business situation and any problems encountered by Instagram with the Facebook API. Zuckerberg will inform his associates of the calls. In six months, he has built a strong relationship with Systrom.

On Friday, April 6, 2012, Twitter made a $ 500 million acquisition offer for Instagram and Systrom alerted Zuckerberg on this offer.

In itself, Instagram was not really a threat any more than Twitter. However, many Instagram users often exported their photos on the mobile app to their Twitter accounts. The combination of the two could have given Twitter a head start in the mobile sector, while Facebook was still in the middle of a delicate technological shift.

Facebook was developing its own Camera application in hopes of conquering the mobile photo market alone, but with Twitter playing for Instagram, Zuckerberg was forced to act fast.

Zuckerberg invited Systrom to his home in Menlo Park, California, near Facebook's headquarters. There, the two have reached an agreement for Facebook to acquire Instagram, several sources told CNBC. Zuckerberg offered $ 1 billion for the startup, and both shook hands. At the time, it was a staggering assessment for a company of only 13 employees, which had just closed a financing operation with a valuation of $ 500 million previously.

Zuckerberg had then Amin Zoufonoun, head of Facebook development at Facebook, comes to his home and both gather all the necessary documents to finalize the transaction. The pair has completed a process that normally takes several weeks over a weekend.

The news of the deal surprised Facebook employees when it was announced on Monday, April 9th. Facebook had made some small acquisitions here and there, but it was the company's first major deal.

Dirk Stoop, product manager responsible for Facebook's Photos products and the development of the Camera application, was among the people shocked by this news. Stoop was informed of Instagram's acquisition this Monday, when his wife told him the news while he was in the shower, according to one of his colleagues.

Facebook became public a little over a month later, and a few days after its IPO, the company released the Camera application on which she had been working for months. The camera was a neat application, but with Instagram now on its side, Facebook just did not need it.

The acquisition of Instagram was essentially aimed at fighting rivals Twitter and Google+ and strengthening its mobile strategy, the sources said.

If Facebook was able to pivot and succeed on mobile devices, it would be great, but otherwise, Zuckerberg wanted at least one other horse in this race, said one of the sources. And it was Instagram.

Since then, the acquisition of Facebook by Instagram has been a resounding success, to such an extent that many people within Facebook have begun to feel that the photo sharing app was hijacking the growth of the Facebook core application, according to reports from Wired and The Information.

When Zuckerberg met with analysts at the call on Facebook's results in July 2018, he praised the success achieved by Instagram, which allowed him to accumulate a billion from users, stating, "We are confident that Instagram has been able to use Facebook's infrastructure to grow more than twice as fast as expected. its own."

After this call, Zuckerberg reportedly told Systrom that he would delete the various ways Facebook's main application channeled growth to Instagram, prompting Systrom to send a note to employees to inform them of changes , with whom he was not in agreement.

Two months later, September 24, 2018 – a year ago today – Systrom and Krieger resigned.