3 Lessons For Any Startup From The Instagram Acquisition
The top story in tech in the last 24 hours is the acquisition of instagram by Facebook for $1 billion in cash or stock. It seems like a rocket ship of a success story, from Stanford graduates to millionaires with over joyed investors in just a couple of years. This made it a hot topic in the opening of our NUvention Web class today. There is a temptation for students and entrepreneurs to read about Instagram and take some of the wrong lessons (the subject of the next post) from their rise; but in looking through their story, and what they’ve built, there are 3 clear lessons Mike Marasco and I came up with that any student or new startup should look at that indicate that instagram masterfully practiced:
Develop the simplest solution to the customer problem, then iterate on what resonates FAST
Instagram is a definite case of getting out of the building rather than having the single grand idea upfront and persisting. At its founding in 2010, the initial idea was for burbn, an app in the gowalla/foursquare vein (Instagram founder Kevin Systrom describes it in this interview starting at 16:30). In textbook customer development fashion, the team learned a lot from developing this experience; in particular: First, html 5 was too slow relative to a native app and second the features users used most was sharing pictures. So despite feeling like the space was crowded, the team pivoted to focus on photo applications. Central to the Instagram principles, was the idea of building a very simple user interface to the application. Simplicity is hard work from a design perspective, but reaps rewards downstream in two important ways: First, in terms of minimizing the number of features developed; and second streamlining the user interface to the essential elements. Some of this comes back to a principal that Chris Riesbeck, one of our faculty team for NUvention Web, describes as the “one button” application. A one button application is a solution to your customer’s problem where the value proposition requires only one button. This can also be about the hard computer science work. Instagram focused on a key feature users always want—speed.
Build a cost effective method of customer acquisition and insure they are yours for keeps
If you look at the employee composition of Instagram, you will notice its mostly developers with a few community managers. No big local sales force like groupon. No one in business development to do deals. Efficiently focused on building the sales mechanism into the product and having people understand and give feedback on the community. The founders had great User experience and product management experience (in addition to technical experience). Also, while the differentiated proposition was around the simple User Experience, streamlined upload and process, posting to mutliple social networks and filters to make photos look great; it created its social network from the get go. In addition, the team did smart research to find the set of influencers that would love what they were doing by looking at who they wanted to reach as influencers in tech; as well as those people who would really be excited about the capabilities of the application (i.e. photographers with lots of twitter followers). A good focus on continued PR coupled with great ways of capturing, keeping and referring customers was key. Great execution can also not be underestimated either—the initial MVP was high quality enough that the influencers wanted to use it; and the team was manically focused on preventing any fail whale type of scenario that would cause customer dissatisfaction. This meant the cost to get each incremental users was inexpensive after the features were in the system; and that a lot of money didn’t need to be spent on “support” to re-win them once the became disengaged or unsatisfied.
Leverage and focus on existing networks to bootstrap your own
While Instagram now has its own substantial network (27 million users according to the industry reports); The app didn’t work with just its own social network, rather it’s principal benefit was that it made it easy to post great photos to twitter (and facebook). This meant that the application had value for the first person that used it—and not just making the photo look good; but sharing the way people wanted to share. The other network Instagram focused on was iPhone users—and hear the focus was important. The team didn’t try to boil the ocean but until very recently stayed manically focused onApple iPhone—even to the extent that the web experience is minimalist compared to what’s in the iPhone app. iOS was the right choice for two reasons: It had the largest consistent platform at the time of launch and the gaps in the built-in photo experience fit well with the advantages of instagram (better photos, multi social net connection). The focus on iPhone also let the team keep performance for the user and simplicity of the experience at the center of what they did.