Zuckerberg’s Jealousy Held Back Instagram and Drove Off Founders

"(Bloomberg Businessweek) -- Over the past decade, Instagram has become an engine of commerce and cultural influence with few peers—aside from its parent company, Facebook Inc. Reporter Sarah Frier’s inside look at Instagram, based on interviews with hundreds of the companies’ leaders, current and former employees, competitors, and stars, traces the union of Facebook and Instagram and the disintegration of the relationship between their chief executive officers. Facebook said in a statement that it has committed significant resources to fuel Instagram’s development and that “Instagram’s success is Facebook’s success.”.The Instagram event didn’t feel very Facebook. On a San Francisco street dotted with homeless encampments, press and the quasi celebrities known as influencers entered a former music venue through an archway made of balloons. Attendees received raspberry-cream-filled cruffins—croissants shaped like muffins—along with espresso drinks and multiple kinds of green juice. Enclaves in the space were designed specifically for selfie-taking, to encourage the influencers to hype the coming product announcement to their digital followers..But the event was beset by technical difficulties. Someone misplaced the file for CEO Kevin Systrom’s presentation, so it had to be remade in a scramble while guests waited. During the delay, the corporate blog post announcing Instagram TV, a new standalone video app, went up as scheduled, ruining the surprise before Systrom arrived onstage. An hour after the event ended, his iPhone flashed. It was Chris Cox, the executive whom Facebook CEO Mark Zuckerberg had recently put in charge of all his company’s apps..“We have a problem,” Cox said. “Mark’s very angry about your icon.”.“Are you serious?” Systrom asked. “What’s wrong?”.“It looks too much like the icon for Facebook Messenger,” Cox said, referring to Facebook’s chat service, which also had a horizontal lightning bolt shape in the center. Zuckerberg couldn’t stand that IGTV competed visually with a sister product..The call was the latest in a string of reminders that, by 2018, Facebook saw even the slightest encroachment by Instagram as a threat. Systrom, who’d sold Instagram to Zuckerberg in 2012, had for years retained enough authority to wall off the parts of Facebook he didn’t like, often telling reporters he considered Zuckerberg to be more like a board member than a boss. Lately, though, Facebook was asserting more control, and Systrom found himself forced to satisfy the concerns of Zuckerberg and his lieutenants before adding products, hiring staff, or even making announcements about his app’s popularity..It took months to get permission to release IGTV without any tie-ins to Facebook’s existing video product. Shortly before the event with the cruffins, Zuckerberg questioned whether Instagram should even disclose that its user count had topped 1 billion. The subtext wasn’t very sub: A Facebook property was reaching thresholds that made it look like the next Facebook, and the parent company wanted to make sure its namesake website and app didn’t suffer for the comparison..Of course, Facebook’s suffering wasn’t Instagram’s fault. Zuckerberg was facing blowback from years of taking shortcuts to win his product attention and ad revenue, including abusing private user data to curry favor with software developers, allowing live broadcasts of murders and suicides, and turning a blind eye to meddling in the U.S. presidential election. Yet with a global #DeleteFacebook movement growing, Zuckerberg saw his other properties, the chat apps WhatsApp and Messenger as well as Instagram, as assets in a new sense—as an explicitly linked family of software..Zuckerberg’s purchase of Instagram, considered wildly overpriced at $715 million in 2012, is worth more than $100 billion today. Instagram now delivers $20 billion in annual revenue, more than a quarter of Facebook’s total. And Zuckerberg’s promise to leave the Instagram team largely independent inspired other founders to join Facebook, too. In 2014 he bought WhatsApp for a then-stunning $22 billion, solidifying Facebook’s dominance over modern communication, and paid $2 billion for the virtual-reality company Oculus, whose hardware he hoped would lead the way into the future..But in late 2018, the Instagram founders abandoned their creation, and the WhatsApp and Oculus founders left the same year. With Facebook in crisis, Zuckerberg had stopped seeing his acquisitions as a portfolio of subsidiaries that could grow into potential second acts. Instead, he would lean on Instagram to strengthen the Facebook app more directly, including by weaving the software together. Today, with his company under investigation for anticompetitive behavior by the U.S. Department of Justice, the Federal Trade Commission, and 47 state attorneys general, Zuckerberg is consolidating his products’ data and building one big mega-network that will make Facebook proper look all the bigger. As one former Instagram executive complained: “Facebook was like the big sister that wants to dress you up for the party but does not want you to be prettier than she is.”.Systrom and co-founder Mike Krieger unveiled Instagram a decade ago as an iPhone app whose filters could quickly improve the low-quality pictures snapped on mobile devices, so anyone could feel like a professional photographer. They attracted 30 million users in 18 months, and by early 2012, their team of 12 could barely keep pace. Krieger was fixing service outages at all hours, bringing his laptop to movies, birthday parties, bars, and, in one instance, a campsite. So when Zuckerberg reached out about acquiring the company, Instagram’s founders were ready to listen. During negotiations over Easter weekend, Zuckerberg said all the right things. In exchange for what was, at the time, more money than anyone had paid for a mobile app, he would extend Facebook’s engineering and operational largesse but leave Systrom and Krieger firmly in charge..Soon after the Instagram employees moved into a small room at Facebook’s Menlo Park, Calif., headquarters, they began to realize their new colleagues weren’t as eager to share as Zuckerberg had promised. In one early meeting, Facebook’s growth team told the Instagram staffers that before they could help, they needed to figure out whether Instagram’s popularity made people less likely to post photos on Facebook. Their study proved inconclusive but served as a warning to Instagram not to expect its software to be treated as equal..Still, Zuckerberg and Systrom developed a mutual respect over monthly strategy dinners at Zuckerberg’s Palo Alto home. On paper they were extremely similar. Born just five months apart, both were raised in comfortable suburban American towns by tightknit Northeastern families. Both attended boarding schools (Zuckerberg captained the Exeter fencing team; Systrom, Middlesex lacrosse) and elite universities (Harvard and Stanford), where they nursed passions for history as well as engineering. Zuckerberg was obsessed with the ancient Greeks and Romans; Systrom loved art history..Their competitive streaks manifested in different ways. When they went on a ski trip to bond shortly after the acquisition, Systrom preferred the unpredictability of backcountry trails, while Zuckerberg just wanted to race black diamonds to the bottom. No matter the stakes, Zuckerberg was win-at-all-costs. Once, when he lost a Scrabble match to a friend’s teenage daughter, he created a simple software program to cheat for him. Systrom fancied himself a Renaissance man, with a passion for self-improvement matched only by his expensive tastes for Italian leather, bespoke mountain bikes, and dinner with celebrities. In 2018, around the time Zuckerberg testified to Congress about one of Facebook’s data-sharing scandals, Systrom passed his wine sommelier exam and sat with the Kardashians at the Met Gala..Instagram’s success earned Zuckerberg’s respect, but not a place on the short list of Facebook executives he counted as confidants and friends. Zuckerberg couldn’t relate to Systrom’s obsession over each contour of Instagram’s design, which slowed product development. Systrom worried that Facebook’s hard-sell approach—sending spammy emails to push users to log in, for example, or using red dots in the interface to create anxiety about missed messages—might cost Instagram the relative trust it enjoyed as a friendlier-looking social network. Still, he believed that keeping Zuckerberg happy would require him to show that Instagram remained valuable to Facebook’s future. He assumed Zuckerberg would continue to honor Instagram’s independence as long as it grew quickly—and crushed the competition..Zuckerberg thought there was little use doing something unless you were doing it for as many people as possible. With Facebook, he had created the largest network of humans ever, and steadily worked to capture more of their time. His opponents included Twitter, Snapchat, Google, and anyone else competing for attention. He wasn’t shy about copying a competitor’s popular features, either, whether that meant incorporating more official news sources into Facebook’s news feed, like Twitter, or making a half-dozen attempts to add Snapchat-style disappearing photos. (Snapchat rejected his $3 billion buyout offer in 2013.) This bolt-on strategy often left Facebook looking less than refined, especially next to Instagram..Where the viral sharing on Facebook could seem to represent the nadir of the internet, Instagram appeared to reward the beautiful and interesting for doing cool stuff. Systrom’s community, and its cultural influence, expanded as he nurtured emerging stars and pursued relationships with A-list celebrities. Systrom was less comfortable with Zuckerberg pushing him into the world of advertising. When Instagram rolled out its first ads at the end of 2013, Systrom said there should only be one sponsor allowed per day, and that he wanted to personally review each ad. (Once, he took it upon himself to edit a promotional photo of fries to make them look crispier.) Zuckerberg insisted that he abandon the white-glove model and transition to Facebook’s system, which allowed anyone with a credit card to purchase as many ads as they liked. It was the right call, in terms of dollars. Instagram reached $1 billion in annual revenue by the end of 2015..Yet the news that Instagram’s growth was accelerating while Facebook’s was slowing didn’t sit well with Zuckerberg. Systrom had done his job too well..By the end of 2016, just as his company was facing its first controversies related to Donald Trump’s election, Zuckerberg was focused on a different kind of threat. Typical Facebook users were posting fewer of their own thoughts and photos, and Zuckerberg suspected Instagram’s successful copying of Snapchat Stories was to blame. (The success came as a surprise even to Zuckerberg, who unbeknownst to Systrom had again tried and failed to buy Snapchat shortly before Instagram Stories debuted.) He enlisted his most trusted data scientists to study whether Instagram was becoming a Facebook alternative and threatening its dominance. Zuckerberg thought the research showed that Instagram would start eating into Facebook’s user base within six months. The word “cannibalization” started to creep into his management meetings..Systrom disagreed with Zuckerberg’s assessment of the data. “This is not Instagram taking away from the Facebook pie to add to the Instagram pie,” he told Zuckerberg at a weekly Monday leadership meeting. “The total pie is getting bigger.” It wasn’t just Instagram vs. Facebook. It was all of these Facebook properties vs. every other choice in the world, like Netflix, Snapchat, Twitter, and, you know, sleep. Others in the room sided with Systrom. They were puzzled by Zuckerberg’s apparent jealousy of Instagram’s success. Zuckerberg had always said Facebook should reinvent itself before a competitor got the chance and that the company should make the decisions about how to do so based on data. “If we don’t create the thing that kills Facebook, someone else will,” the booklet passed out at employee orientation reads..Yet Zuckerberg couldn’t seem to bear the idea that Instagram might outshine Facebook. He told Systrom he believed Instagram Stories was successful not because of its design, but because they’d happened to release the feature ahead of Facebook Stories. Facebook had helped Instagram long enough, he decided. In 2018, Instagram would have to start giving back..Instagram users barely noticed Zuckerberg’s first change. He ordered Systrom to build a prominent link within the Instagram app that would send his users to Facebook. Around the same time, he had his own engineers remove the prominent link to Instagram on Facebook’s site..Zuckerberg’s willingness to expand Instagram’s team had waned, too. He balked at adding engineers to facilitate the release of IGTV, even though Instagram was on track to hit 1 billion users and $10 billion in revenue that year. He allowed Systrom and Krieger to hire 93 more employees, bringing their count to around 800—still far short of what they felt they needed. Instagram’s co-founders were shocked; Zuckerberg granted Oculus, which was losing money, more than 600 new employees. Krieger dug up the numbers and learned that Facebook, which hired 8,000 people in 2018, had six times as many employees as Instagram when it added its billionth user..Instagram now felt like a Facebook product arm, not an independent operation. Zuckerberg made this new order official with a massive reorg emphasizing that Facebook’s properties were to be a “family of apps.” Systrom would now be reporting to Cox, who was previously just in charge of the Facebook app. “Let’s be straight with each other,” Systrom told Cox. “I need independence. I need resources. And when something happens, I know I’m not always going to agree with it, but I need honesty. That’s what’s going to keep me here.”.Cox knew he couldn’t afford to lose Systrom or Krieger, especially as Facebook’s and Zuckerberg’s public images were souring. He resolved to prioritize retaining the Instagram co-founders. Soon, though, Facebook was facing a different crisis after the Guardian, the U.K.’s Channel 4, and the New York Times published whistleblower testimony that Cambridge Analytica, a Republican political consulting firm, had collected the private data of tens of millions of American Facebook users and attempted to influence the U.S. presidential election while Facebook looked the other way. Suddenly, all of Facebook’s problems were up for public debate. Zuckerberg made plans to hire thousands of people to work on issues of “integrity.” Systrom requested hires to address Instagram-specific concerns (anonymous users, less-visible dangerous communities), but Zuckerberg said no. Instagram would have to manage its problems with existing resources or the central integrity team..After Instagram reached 1 billion users, Zuckerberg directed Javier Olivan, Facebook’s head of growth, to draw up a list of all the ways Instagram was supported by the Facebook app. Then he ordered the supporting tools turned off. Instagram would no longer be promoted in Facebook’s news feed. Sure enough, Instagram’s growth slowed to a halt..Systrom had never been one to criticize Zuckerberg in front of his employees. But after months of what he saw as obstruction and bigfooting, he wrote a long internal message to his team saying he disagreed vehemently with Zuckerberg’s undercutting of Instagram. By the fall of 2018, Systrom started confiding to his close friends that if Zuckerberg wanted to run Instagram like a mere department of Facebook, maybe it was time to let him. In the name of growth, Instagram adopted some of the strategies Systrom had blocked in the past, including pushing out frequent app notifications and aggressively promoting suggested people to follow. Time spent on the app returned to its typical levels; the Facebook strategies, which had seemed so cheap and anti-Instagram, worked..Not long after the IGTV debut, when his first child was about six months old, Systrom went on paternity leave. He was expected back at the end of July, but extended his leave by a month, then another. When he came back in late September, he and Krieger gathered their top staff in a conference room. They were both resigning..Systrom was diplomatic, explaining that after six years within Facebook, it was time to try other things. But he didn’t hold back with Facebook management. Earlier that morning he’d reminded Cox that he’d asked for resources, independence, and trust. “None of the things I asked for have happened,” he told Cox..In the 18 months since its founders left, Instagram has grown more in Facebook’s image than ever, prioritizing integration with Facebook over its own product development. Most Instagram users still don’t know Facebook owns the app, even though it’s been rebranded as “Instagram from Facebook.” More obvious has been the increased frequency of advertising on Instagram..Zuckerberg hasn’t disclosed an updated number of Instagram users since 2018. Eventually, he says, Facebook’s total user number won’t be broken out, either. The company will just report one number—total users of the Facebook “family,” including Facebook, WhatsApp, Instagram, and Messenger. The overall number sits at 2.9 billion, accounting for duplicates between the apps. Using an overall number will allow Zuckerberg to mask any slowdown in the core Facebook app’s growth. It will also make it tougher for antitrust-minded regulators to recognize that Facebook owns the world’s top Facebook alternative..Cox, too, left the company in 2019 after disagreeing with Zuckerberg’s push for greater encryption across the app family. Instagram’s new top boss is Adam Mosseri, who formerly ran Facebook’s news feed. His title is “Head of Instagram.” These days, Facebook only has room for one CEO..Excerpted from the book NO FILTER: The Inside Story of Instagram, by Sarah Frier. Copyright 2020 by Sarah Frier. Reprinted with permission of Simon & Schuster, Inc. All rights reserved..©2020 Bloomberg L.P..Zuckerberg’s Early Diary Plays a Starring Role in New Facebook Opus"

Zuckerberg’s Jealousy Held Back Instagram and Drove Off Founders

Zuckerberg balked at adding engineers to facilitate the release of IGTV, even though Instagram was on track to hit 1 billion users

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Zuckerberg’s Jealousy Held Back Instagram and Drove Off Founders

Zuckerberg balked at adding engineers to facilitate the release of IGTV, even though Instagram was on track to hit 1 billion users

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