Instagram departures hit Facebook shares


In a surprising move yesterday, we found out that the photo-sharing app Instagram's co-founders, Kevin Systrom and Mike Krieger had left Facebook, which had acquired the then two-year-old company for a whopping $1 billion in 2012.

The company also seems to have been initially caught off guard by the news of the Instagram founders' departure, first reported by the New York Times on Monday night. Facebook users also have been flocking to Instagram as an escape, exhausted of the political bickering and privacy scandals that plague the parent company.

Acton even claims he was "coached" by Facebook on how to discuss the merger with Facebook in front of strict European Union regulators, saying in the interview: "I was coached to explain that it would be really hard to merge or blend data between the two systems".

And there's lots of speculation that the job won't go to one of the remaining Instagram crew, but a Facebook lifer and product designer called Adam Mosseri.

"Building new things requires that we step back, understand what inspires us and match that with what the world needs", Mr Systrom wrote, without mentioning Mr Zuckerberg. Mark Zuckerberg, Facebook's CEO, made a claim recently that Instagram grew far faster under Facebook's corporate umbrella than it could have if Instagram had stayed an independent company.

Facebook doesn't disclose how much money Instagram pulls in, though Wedbush analyst Michael Pachter estimates it'll be around $6 billion this year, or just over 10 percent of Facebook's expected overall revenue of about $55.7 billion.

Instagram's value to advertisers is only growing as Facebook's core app becomes worse at younger demographics, the person said. At the time, the photo-sharing site had over 30 million users.

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WhatsApp chief executive and co-founder Jan Koum said in April he would quit the popular messaging service he co-founded in 2009 and sold to Facebook in 2014.

"We're planning on taking some time off to explore our curiosity and creativity again", Systrom said in a statement. "Companies make mistakes but their fix job has been very disappointing".

Those shuffles, combined with the founders' departures, create an opening for Facebook to take charge of the product more directly.

There's no official word on what caused the Instagram founders to leave, although rumours hint at clashes between the two men and Facebook executives over diminishing independence and demands to direct more users from Instagram to Facebook.

As it stands, Facebook plans to begin placing advertisements in WhatsApp starting next year, and Acton's metered-model has not seen the light of day. They also leveraged Facebook's abundant resources such as engineers, according to Bloomberg.

That likely didn't sit well with Instagram's founders, Akhtar and other analysts said.