Weekly Business Saga

The Blueprint of Instagram

Authored by Dhruv Paniya, Student at School of Law, NMIMS, Indore

What is Instagram?

Instagram is a photo and video-sharing social media platform, founded as “Burbn” in the year 2010 by Kevin Systrom and Mike Krieger. Both the co-founders focused on making it a photo-sharing app. Burbn received its first round of funding of $500,000 from Baseline Ventures and Andreessen Horowitz. The first Instagram post was shared by Mike Krieger on 16th July 2010. A few hours later,  Kevin Systrom shared his first Instagram post. Users can edit photos using different default filters in the app itself. It also allows users to tap people, use hashtags, and tag their location. The content can be shared with approved followers or with everyone publicly. As of 2021 Instagram has 1 billion active monthly users. 

Business Model

Instagram has created a business model based on value propositions. It is one of the most influential social media platforms. Also, it is a great platform for advertising as it has a huge number of monthly users. These days, whenever we use Instagram, we see a lot of so-called influencers. Many of them promote products or services of different companies. Many brands use Influencer marketing and in the last few years, this has gained a lot of attention. Influencers who have a good number of followers on their Instagram pages give brands high chances of getting their products/ services sold. This type of marketing also helps the brands because the influencers have gained the trust of many people and recommendations are trusted by the public.

It is also necessary for brands to use certain business practices so as to maintain a tight grip among the public. One of the most basic practices is to post consistently so as to be in constant touch with the audience. The second important practice is to focus on posting good quality content rather than posting in bulk quantity. Proper use of business practices helps brands grow.

Revenue model

Prior to 2013, Instagram was just a photo-sharing app with no particular business model. In 2013, Instagram launched Instagram marketing solutions 2013. It has an advertising-based revenue model which allows brands to promote their products by sponsored posts which can be shared as picture ads, video ads, story ads, and carousel ads. The cost per click for Insta posts and stories is $0.6and $0.5 respectively. The cost per mille for Insta posts and stories is $1.65 and $0.90 respectively. The ads can be customized using location, interests, age group of consumers, or automated audience.

Acquisition and Investors

Initially, Twitter was keen on acquiring Instagram and even offered $500-700 million in Twitter stocks but it was eventually acquired by Facebook in the year 2012, for $1 billion. Zuckerberg thought of Instagram as a threat to Facebook and that is the main reason he acquired it. This deal did not look promising at that time because Instagram has zero revenue but as seen in 2021, this looks by far one of the best technology deals as Instagram has 1 billion monthly users and is very popular around the globe.

The first funding Instagram received amounted to $500,000 which it received from Baseline Ventures and Andreessen Horowitz. The second major funding Instagram received amounted to $5 million for which Benchmark was the lead investor. The third major and the biggest funding Instagram received was $50 million in which sequoia capital was the lead investor. This funding closed just a few weeks before Instagram was acquired by Facebook. 

Revenue and Profits

Instagram ad revenue was $1.61 billion in the year 2016. The ad revenue rose to $9.08 billion in the year 2019 and it crossed the $15 billion mark in the year 2021.

Key takeaways

  • Instagram was launched in 2010 as a photo-sharing app. It was acquired by Facebook in 2012 for $1 billion as it was perceived as a threat to Facebook by Zuckerberg. 
  • Even after the acquisition, Instagram continued to operate separately.
  •  Instagram received its major funding of $50 million in 2012 with Sequoia capital being the lead investor.
  • Instagram reported 1 billion monthly users as of 2021.
  • Instagram has an advertisement-based revenue model.

Conclusion

Instagram in 2021 is much more than just a photo and video sharing app. It has changed the way we live and the way we think. With over 1 billion users, it is also one of the best platforms for different companies to promote their products and services. If Instagram would not have been purchased by Facebook, it would have overcome facebook. Instagram has also become a platform where people can freely raise their voices. It has affected social culture and politics. It is also a great platform to gain knowledge. Besides this, there is a dark side to Instagram. The type of lifestyle shown on Instagram does not match the daily humdrum of teens which can lead to serious mental health issues such as depression, anxiety, fear of missing out, etc. Everything on earth has its pros and cons; one must make a balance between the two so that these things do not hamper his/her life.

Disclaimer*- The article is a piece of general information and the views expressed are solely that of the Author, BFTLR may or may not subscribe to the views of the Author.

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