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Ben and David discuss Facebook's acquisition of Instagram in 2012. Was it a success? If so, what are the criteria that made it work? What lessons can be learned for other acquisitions in the future? Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Ben Gilbert?

  All right, listeners. Now is a great time to tell you about a longtime friend of the show, Vanta. AI has scrambled the whole security picture. It used to be that you proved that you were secure once a year on audit or a static PDF, then everyone would nod and you're done. But in an AI-first world, that doesn't hold up anymore.

• 0:19David Rosenthal?

  Yep. Your risk surface changes every week now. A vendor turns on an AI feature, or someone writes in a new model without telling IT, and your posture is different than it was last week, let alone at your last audit. Vanta's own research found that around 70% of companies have this quote-unquote "shadow AI" running with no security review at all.

• 0:40Ben Gilbert?

  Right. And that's where Vanta comes in. They're the leading agentic trust platform, meaning they've built the thing that closes the gap. And the way that they close that gap is Vanta Agent. Think of it as a GRC engineer, that's Governance, Risk and Compliance, except that it's software and it doesn't sleep. It finds the issues, drafts the fixes, and cuts the time that you'd spend on vendor assessments in half.

• 1:02David Rosenthal?

  In half! Which is exactly why more than 16,000 companies today run on Vanta. Companies like Ramp, Cursor, and Snowflake all stay audit-ready and catch the risks that crop up between audits across every vendor, every AI tool, the whole environment.

• 1:20Ben Gilbert?

  And that's the real value. Trust has to be continuous now, which is why Vanta automates your security, your compliance, and the work to earn and prove trust. We're huge fans of Vanta over here, and literally hundreds of Acquired listeners have become Vanta customers at their companies over the years. So you can get $1,000 off Vanta at vanta.com/acquired. That's V-A-N-T-A dot com slash acquired for $1,000 off, and just tell them that Ben and David sent you.

• 2:04Speaker 02

  Welcome back to episode two of Acquired. I'm Ben Gilbert.

• 2:08David Rosenthal?

  I'm David Rosenthal.

• 2:09Speaker 02

  And we are your hosts yet again, at least for the second time and hopefully many, many more.

• 2:14David Rosenthal?

  Hopefully many more. Thank you to all of our listeners, all few of you for the amazing few but growing, small in number, strong in spirit.

• 2:24Speaker 02

  True.

• 2:25David Rosenthal?

  Thank you for the amazing feedback. It was incredible. We learned a lot. We learned that Ben has amazing idioms.

• 2:33Speaker 02

  Amazing idioms. David has dulcet tones.

• 2:39David Rosenthal?

  Thank you for the feedback. We will try to incorporate it and hope that we keep getting better. If you have more feedback after this one, please send it to us. You can find us on, you can find the show on Twitter at @AcquiredFM. You can find Ben at

• 2:57Speaker 02

  Gilbert.

• 2:58David Rosenthal?

  You can find me, David, at DJ Rosent, D J R O S E N T. And our website is live at acquired.fm.

• 3:08Speaker 02

  So should we introduce ourselves again? We think for the first couple, so people, so you know, more than our, our original five listeners get the lowdown.

• 3:17David Rosenthal?

  I think we can do it this, just this once.

• 3:19Speaker 02

  Then once we're viral after episode three, then we can stop introducing ourselves.

• 3:23David Rosenthal?

  Sounds great.

• 3:24Speaker 02

  So I'm Ben Gilbert. I am the co-founder of Pioneer Square Labs in here in Seattle. We come up with ideas for companies. We prototype them, we build them, we try and get customers, and if it seems to be working, then we recruit really talented people to come in and take the company from us and we go start the next thing.

• 3:45David Rosenthal?

  And I'm David. I am a principal at Madrona Venture Group. We are an early-stage venture capital firm located here in Seattle. Invest in seed, series A, series B, stage technology companies. Always looking for the next great thing, which might become the next great acquirer, or maybe acquiree. Hence, our podcast.

• 4:09Speaker 02

  All right. So with that, let's segue into our second episode. Our first was Disney acquiring Pixar. And here for our second is another landmark, successful, even in the very recent last couple of years, this one's not nearly as old, landmark, successful acquisition, Instagram by Facebook.

• 4:29David Rosenthal?

  Facebook buying Instagram. So as a quick reminder, the framework that we've decided on for our show is we're going to briefly talk about the acquisition, kind of facts and history. Then each of us, Ben and I, are going to categorize the acquisition into a few buckets that we've identified. And then we're going to do a fun segment called, "What Would Have Happened Had the Acquisition Not Happened."

• 4:55Speaker 02

  Trust us, it's fun.

• 4:57David Rosenthal?

  And then we're adding a new one for this episode, which is tech themes that we think are illustrated by this acquisition. And then finally, we're going to give the deal as a whole a grade. And we heard the feedback that Ben and I agree too much, so we're going to try and be more controversial here.

• 5:16Speaker 02

  I'm not, though.

• 5:18David Rosenthal?

  Yes, you are. All right. Instagram. So I remember vividly, this was one of those moments in my technology life, at least, exactly where I was the day I found out that Facebook bought Instagram for a billion dollars. And today, sitting here in 2015, where there are like... 623 unicorn startups out there that are valued at, you know, more than a billion dollars. Back in April 2012, there were very, very few.

• 5:58David Rosenthal?

  And the, the even idea that a company that had 13 employees and no revenue and made an app on your phone could be worth a billion dollars was pretty shocking at the time.

• 6:11Speaker 02

  And totally shocking because there was no, you know, discussion of it being worth a billion dollars pre-acquisition. The only indicator that that number was ever talked about was when the deal was done and announced to the public.

• 6:24David Rosenthal?

  Yep. And, and interestingly, Instagram raised its, I believe, Series B round of venture capital just like a week or even less than a week before the acquisition happened and did value it at several, several hundred million dollars. But all that only came out just right before or even during and after the acquisition news, which was pretty momentous, really ushered in, Ben and I have been talking about this for this, this acquisition for months. It was part of the genesis of the idea of this show. This acquisition, I think, really ushered in, you know, quote unquote, "the age of the unicorn."

• 7:06Speaker 02

  Yeah, as much as I hate the term, it sure does see that way, seem that way.

• 7:12David Rosenthal?

  So, quick facts, April 2012, Facebook announces that they are buying Instagram, company with 13 employees, no revenue, no obvious monetization model, and had 30 million users at the time. And interestingly, just a week before, Instagram had launched their Android app and added 1 million users. At that time, with 13 employees and 30 million users, Instagram had 2.3 million users per employee at acquisition. Pop quiz, how many users per employee do you think Instagram has today?

• 8:00Speaker 02

  Well, they've hired a whole bunch of people, right?

• 8:02David Rosenthal?

  They have.

• 8:03Speaker 02

  So they've hired, uh... I think what we were talking about earlier, they have like 150 employees now?

• 8:07David Rosenthal?

  They have about 150 employees, as best as we can tell.

• 8:11Speaker 02

  Uh, I don't know, that, that number's gotta be significantly worse now.

• 8:16David Rosenthal?

  It's better. 2.6 million users per employee. Instagram now has, two and a half years later, 400 million users.

• 8:28Speaker 02

  Wow.

• 8:31Speaker 02

  Huh, okay, so...

• 8:35Speaker 02

  I don't know, I feel like I'm already hinting at my, my answer to the question later of my rendered conclusion, but, you know, we, this is our second episode, we're still getting to the easy ones here. Pretty incredible, honestly, I think the, the thing that always amazed me about Instagram was, it's so simple. They focus their eyes on the prize, and the question is like, you know, we'll, we'll, we'll get to this a little bit later, but what would have happened to that incredible, simple, sheltered platform if it wasn't integrated into the Facebook strategy and they were forced to start clawing and scratching for, for more of that attention that, um, that keeps people tied to Facebook? I think the interesting thing that Facebook realized is, they're the, they're the social

• 9:16Speaker 02

  fabric, they're necessary, and it was getting to the point, you know, everyone's parents were on Facebook, it became more of a utility in our lives than, than sort of an escape or an enjoyable thing, and, um, actually, a quick aside, it's, it's crazy, I was scrolling back through my, um, my history of writing on a friend's wall, and this is freshman year of college, and our conversation back and forth on our, each other's like, public Facebook walls look like text messages, and they're, they're talking about what grades we got in classes, and like, sort of private stuff that I wouldn't be posting today. It's really fascinating that, um... You know, Facebook was, was very much that, that sort of fun place at that point.

• 9:57Speaker 02

  And not this, this thing that we viewed as kind of necessary and a, a thing that it could be assumed that pretty much every person would have. And you know, you see, there's a lot of reports of, "Hey, kids aren't using Facebook. They're just using Instagram. They're just using Snapchat." They're all using Facebook too, but it's for schoolwork. I mean, it's for the, the necessary, less fun things in their lives. And you know, starting with, with Instagram and with other acquisitions later, I mean, Instagram is, is sort of where you want to hang out and Facebook is where you have to go.

• 10:27David Rosenthal?

  Yep. And you know, Facebook, it's so easy to forget now, sitting here in 2015, and maybe we'll, maybe if, if we're, we're looking for something funny in 2018, we'll, we'll go back and listen to our podcast that we're recording now. But, but it's even so hard to remember. Like, this was only three and a half years ago when this acquisition happened. And Facebook was in such a different place from where it is today. The company had just recently gone public. We, Ben and I were just talking about this right before the episode. They were still in the whole HTML5 mobile app hell. Their apps were buggy.

• 11:09Speaker 02

  God, can you remember when that was even a debate?

• 11:11David Rosenthal?

  Oh, nightmare. And right in like, you know, now, like, what is like, half of Facebook's revenue, if not more? We haven't, we should make a note too, that we haven't fact-checked most of our numbers, so we could be wrong here. But at least, it seems like everything that people talk about with Facebook is their mobile app installs and their CPI ads. Like, couldn't even do that with HTML5. Remember back, you know, you know, people talk about now, you know, and I, and I think, you know, Mark Zuckerberg has even said, you know, that Facebook really made a huge misstep in mobile. And, and apps like Instagram, like

• 11:52David Rosenthal?

  WhatsApp that they would later acquire, like Messenger that they would build within Facebook in the coming years, really stepped in and became, took over a lot of the value that people were getting out of Facebook from back in the day, the fun.

• 12:08Speaker 02

  And it's amazing, because Facebook, you know... Really, really killed it on the desktop. There's a lot of different boxes everywhere. If you remember, there was the mini feed and then there was the wall and then there was apps that you could have installed.

• 12:19David Rosenthal?

  Superpoke.

• 12:20Speaker 02

  Each one, oh, Superpoke. God, do I miss Superpoke. There are these boxes that are sort of floating around all over the place maximizing your screen real estate. And when they try to translate that to a mobile experience, you know, it's tough to pare down all that stuff when your app has all this incredible functionality. Whereas you have Instagram, which is born in the mobile era, and I can have a funny story about this. It's born in the mobile era and has these immersive, beautiful, damn near fullscreen photographs, and all of my attention is on that one thing at one time. And it was focused on making anybody able to look like a talented creative, even if we weren't. I mean, I specifically remember one of my early Instagrams was of like the torn up bottom of my jeans and my shoe. And it looks so artsy with a filter. And I couldn't, it was a place where you could show off.

• 13:04David Rosenthal?

  That's so emo.

• 13:05Speaker 02

  Fullscreen. And really like, you know, what they did was understand what people's attention span and what people's intention looked like when they were on that platform. And I remember, this is not a thing that I came close to understanding at the time because I remember I used to work at a Dogpatch Labs at Pier 38. May it rest in peace. It's recently been demolished.

• 13:33David Rosenthal?

  When you're interning at CoTwee.

• 13:35Speaker 02

  At CoTwee, yeah, in San Francisco. And

• 13:37David Rosenthal?

  It's self an acquisition.

• 13:38Speaker 02

  Yeah, yeah.

• 13:39David Rosenthal?

  An acquisition and then another acquisition.

• 13:41Speaker 02

  Yeah. Everything gets, everything becomes Salesforce eventually.

• 13:45David Rosenthal?

  In the enterprise.

• 13:47Speaker 02

  Yeah. Anyway, so I'm at Pier 38 and the guys from Bourbon, later Instagram, are upstairs working on a pivot from their kind of location based thing to this very simple, filter focused, upload your photos to a social network app. And I remember seeing a demo of it when I walked by one time and telling Kevin, I'm pretty sure Facebook already lets you upload photos from your phone and everybody's already on that.

• 14:15David Rosenthal?

  And that Ben is why you're not a venture capitalist.

• 14:18Speaker 02

  We'll leave that to David.

• 14:20David Rosenthal?

  But no, I think, you know, Ben, what you're saying, I think, really illustrates, you know, we're going to talk about themes, you know, as part of our programming in a minute, but I think this really illustrates something critical about why Facebook needed Instagram and that was engagement. You know, Facebook before mobile, remember, you know, back when it first launched when I was in college and you were probably in high school when it first launched, right?

• 14:47Speaker 02

  Yep.

• 14:48David Rosenthal?

  You know, how much engagement did you have with Facebook? It was, you know, it's related to this concept of fun, right? And now Facebook has become this utility and I barely engage with it at all. But Instagram and messaging, WhatsApp and other services like that have become on mobile, these atomized services where your engagement lies and that's the core of driving advertising revenue.

• 15:14Speaker 02

  And Facebook has always been really good at this strategy where social networking is a cool kids game. I mean, there's the cool kids go to a thing and then the late adopters come on and then parents come on and then it's boring and then it's built for the old world platform and then it atrophies and it dies. And what Facebook did in acquiring Instagram is, is, you know, set their hubris aside and say, we're not the most important platform. The most important thing is our business staying alive and what we have to do is bet on whatever the thing where the people are on the new platform is. And, you know, after they, after that critical first step, then they can start learning about what makes that so successful and kind of integrate all of those really talented

• 15:58Speaker 02

  folks to kind of like teach Facebook how to do that, too.

• 16:02David Rosenthal?

  So that brings us to section number two of our show. What category would you put this acquisition in? People, technology, product, business line, other?

• 16:17Speaker 02

  It's fine, I was just talking about people, but that's totally second order here. I'm gonna say this is product. Facebook left it alone. I mean, Facebook did the thing that every other acquirer can't seem to resist in any scenario, and that is saying, "Oh, you know what this could do? This could make our main product better." And the reason that that product was dangerous to you and potentially kicking your ass was because they figured something out you didn't. And it's been really incredible to watch Instagram have its own evolution, and you know, albeit with some little boosts and from the Facebook newsfeed and things like that, doing some algorithmic priority, but it's really remained separate, a separate team, and stayed very true to the core of what they set out to do.

• 17:03David Rosenthal?

  I think everything you said is right, and totally the natural category to put this in is products, but I'm gonna be a little bit controversial. I'm actually gonna say technology here. And the reason I'm gonna say technology is not because of any specific great computer science-based innovation that the Instagram team had, but I'm gonna say that this became, as I was talking about, really the first piece of Facebook's entire strategy for the mobile technology wave that they missed, that they missed from the beginning.

• 17:47Speaker 02

  Wait, David, you think that they, sorry, this is, you think that they wouldn't have gotten their act together in making their app what it is today without, I mean, let's look at what their app is today. It's a collection of the most talented iOS developers in the world, and a lot of the best mobile designers in the world packed into one office, developing maybe arguably the best suite of apps in the world.

• 18:13David Rosenthal?

  You just said the critical thing.

• 18:14Speaker 02

  Sweet.

• 18:15David Rosenthal?

  Sweet of apps. What is Facebook today? Facebook is a suite of apps company.

• 18:22Speaker 02

  I'm not gonna disagree with you there.

• 18:25David Rosenthal?

  I think without Instagram, without, and it's impossible to know how much of this is Zuckerberg and Sheryl Sandberg and the rest of the Facebook team, core Facebook team strategy versus what's come from Kevin and Mike and the rest of the Instagram team. But I think without that acquisition happening, I think Facebook probably doesn't or make an offer for Snapchat somewhat a few months or a short time after to buy Snapchat for three billion that Snapchat rejected. I think Facebook doesn't buy WhatsApp for the incredible amount of money that it did.

• 19:08David Rosenthal?

  And maybe, you know, maybe even Oculus to a certain extent. But even more than that, you know, again, think back to April 2012 when Facebook on mobile is this HTML5 mess. And think about Messenger now. To go from that HTML5 mess to the Facebook, core Facebook app today, which drives a huge amount of revenue through their paid install program, ad program, and then to develop Messenger on the side and then have the guts to rip it out and make it part of this suite of app strategy. You know, Messenger, I believe the latest numbers has 700 million active users, which

• 19:53David Rosenthal?

  is pretty incredible for something that is now a fully standalone app.

• 19:59Speaker 02

  Yeah, so I'll go with you on the technology of Instagram being a kick in the pants. But I don't think, you know, we talk about like what a technology acquisition that is truly about, you know, they, you know, they understood how to do this computationally difficult thing better than we did and we needed it to enhance our core product. Or, you know, Apple acquiring the Touch ID company because they could make a differentiated product based on integrating that technology. I think that's a far second order thing here to acquiring the product of Instagram.

• 20:35David Rosenthal?

  You might be right.

• 20:38Speaker 02

  You'll get me later.

• 20:39David Rosenthal?

  I'll get you later.

• 20:40Ben Gilbert?

  All right, listeners. Now is a great time to thank our longtime friend of the show, ServiceNow. If you are running a large enterprise, AI agents are likely spread across every team, and deploying them is no longer the hard part.

• 20:54David Rosenthal?

  Yeah, the hard part is knowing what permissions they have, what employees are using them for, or what decisions AI is making. AI security for an enterprise at scale is not a small concern. Like, the risks are real.

• 21:08Ben Gilbert?

  Exactly. And the challenge with AI is governing it, securing it, measuring it, and making sure that it actually delivers value. That is why ServiceNow built the AI Control Tower.

• 21:18David Rosenthal?

  Yep. AI Control Tower gives enterprises a single place to see, manage, govern, and optimize AI across the entire business. And it works with any AI, not just theirs. Every device on your network, every permission across every system, every AI agent, visible and secure in one place.

• 21:36Ben Gilbert?

  And ServiceNow can do this because they've spent more than 20 years building the operational backbone of the enterprise: the workflows, governance, approvals, security controls, and institutional knowledge that power how work actually gets done across IT, HR, customer service, finance, and security.

• 21:52David Rosenthal?

  ServiceNow already runs more than 100 billion workflows annually, and trillions of transactions for more than 85% of the Fortune 500. So when companies need a place to govern AI at enterprise scale, they're building on a platform at the center of how their business already operates.

• 22:08Ben Gilbert?

  And in a future that isn't going to be one AI, it's going to be thousands of AI agents working across every function of the company. But the question is, who's managing them all?

• 22:18David Rosenthal?

  So if you're trying to turn AI ambition into real business outcomes and make it work safely, securely, at scale, go check out servicenow.com/acquired and tell them that Ben and David sent you. All right. What would have happened if Kevin Systrom had said no?

• 22:35Ben Gilbert?

  Yeah.

• 22:36David Rosenthal?

  Instagram had just raised $50 million. They had plenty of runway, bright future ahead of them. Where would we be today?

• 22:46Speaker 02

  Yeah. You know, I think Instagram as a product to users wouldn't be significantly different.

• 22:55Speaker 02

  I think that it would have continued to grow more slowly because they didn't have the resources. They wouldn't have had the prioritization from, and you know, this is theoretical. This is something we talked about before. Did, you know, Facebook really prioritize Instagram posts in the newsfeed algorithm? Probably. I mean, it sure looked like it. It looked like we had a huge spike in that and there was probably a lot more Instagram traffic.

• 23:14David Rosenthal?

  On the other hand, one of the things I'm still bummed about today as

• 23:19Speaker 02

  Twitter.

• 23:19David Rosenthal?

  A loyal Twitter user. Oh, man. How great was it when Instagram was natively integrated into the Twitter stream?

• 23:26Speaker 02

  Yeah, that was pretty cool. And that was, that was a, that was a sad, sad day when that integration broke.

• 23:32David Rosenthal?

  Totally sad.

• 23:33Speaker 02

  And actually, it changed my behavior. Like, I don't tweet photos on, like, I don't put a photo on Instagram and then tweet it because I know it's not going to show up. I natively upload it to Twitter now.

• 23:44David Rosenthal?

  Yep. And how often do you do that?

• 23:48Speaker 02

  Every third, fourth tweet.

• 23:51David Rosenthal?

  Maybe, yeah, maybe.

• 23:52Speaker 02

  But, but, but, I'll say, I was gonna say, oh, these things negate each other. Twitter's at 300 million users and churning out everyone they can bring in. Turned out a billion plus so far. And Facebook's sitting pretty with, you know, a decent chunk of the world's internet-enabled population. So I think anything Facebook does is, you know, a 3, 4x, maybe 5x force multiplier on top of anything Twitter can do.

• 24:18David Rosenthal?

  No doubt. However, I do think, you know, Instagram has become itself a huge driver of audience.

• 24:26Speaker 02

  Yeah, 400 million active users.

• 24:27David Rosenthal?

  400 million active users, added 100 million this year. It's crazy.

• 24:32Speaker 02

  Yeah.

• 24:34David Rosenthal?

  But I think they, you know, I think you can make an argument that they could have continued bootstrapping their way up into that user base through other platforms like Twitter and using Facebook as well.

• 24:45Speaker 02

  Yeah. I mean, here's, here's how I think it would be different. I think, you know, in the last six months especially, Twitter has, or I'm sorry, Instagram has a very real ad platform. And that they, they took their time in developing it. First, a very full-serve one where you had to work directly with the Instagram team, now a self-serve dashboard. But You get these really immersive brand ads that are platform appropriate. They don't feel like something that I want to scroll past. I want to look at it almost as much as I want to look at the gorgeous nature of photography that I see. They just didn't have the funnel of advertisers to point the ad platform at. So it would have been very slow to try and get advertiser attention and people to come over and use the Instagram platform and not only to spend their dollars there, but to

• 25:30Speaker 02

  spend their attention there learning a new platform. Whereas in the Facebook acquisition, they have this kind of dual deployment where you can buy ads on either from a single ad dashboard, much like Google did very early on with YouTube.

• 25:43David Rosenthal?

  Yep. So I'm going to go a little bit kind of out there crazy direction with this, and this is pure speculation, but I think if this acquisition hadn't happened, you know, I mean, like I was talking about earlier, this kicked off the era of the constellation of apps, you know, with Facebook and with Twitter buying Vine, and gosh, even Instagram itself now between Boomerang that they just launched and HyperLapse.

• 26:13Speaker 02

  And Layout.

• 26:15David Rosenthal?

  Yep.

• 26:16Speaker 02

  Which kudos to the Instagram design team. The cohesiveness of those is really nice.

• 26:22David Rosenthal?

  So let's imagine though, for a second, that this constellation of apps thing hasn't become a theme in the technology landscape over the past couple of years. What's really interesting, well, what's really interesting because it has, you now have all of these major social platforms that have been created over the past five years, with the exception of Snapchat. All of the US new domestic, US-based social platforms are owned by other companies with other business models and other goals.

• 27:02David Rosenthal?

  And if you think about the level of business model innovation that's happened at this mobile app layer in the US and compare it to Asia and WhatsApp, now...

• 27:15David Rosenthal?

  It's a pretty bold claim to say the acquisition of Instagram prevented the rise of WhatsApp-like business models in the US. But let's just play this out for a minute. Sorry, not WhatsApp, WeChat. Apologies. I meant WeChat.

• 27:32Speaker 02

  Yeah, as a quick aside for listeners, if you haven't been reading up on WeChat, it is insane.

• 27:36David Rosenthal?

  Absolutely insane.

• 27:37Speaker 02

  It's on the surface a messaging app, but it's effectively like an operating system where it's much easier for especially non-technical folks to build a plugin for their business to WeChat that enables all sorts of things from booking doctor's appointments to picking your kids up at school, all within this theoretical messaging.

• 27:57David Rosenthal?

  In my opinion, WeChat is nothing short of literally the creation of an entirely new, major, major business model for technology companies. And that is the value-added services and integrations business model. Before WeChat, this is, I mean, it's amazing, this product is given away for free, not monetized through advertising, and still in China, which is a brutally competitive market where it is very hard to monetize users, this product has, I believe the latest estimates are like a $7 ARPU, annual revenue per user in China.

• 28:37Speaker 02

  Just more, I think more than Twitter and rivaling Facebook, and those are ad platforms.

• 28:41David Rosenthal?

  Exactly. And that is pretty incredible. And so what I think is amazing is because in the US, you've had these new innovative mobile products be acquired by larger companies with older established business models. You haven't seen that happen in the US as much. Now, there are lots of other factors, you know, like in China, there was no, you know, mobile was really the first computing platform to be widely adopted across the whole population. There was no legacy desktop product and technology layer like there was in the US. That certainly had a lot to do with it, too. But imagine, you know, what type of business model innovation

• 29:24David Rosenthal?

  we might have seen had Instagram remained independent. I don't know. And certainly Snapchat is playing with it, too.

• 29:34Speaker 02

  In terms of constellation of apps?

• 29:36David Rosenthal?

  In terms of business models.

• 29:38Speaker 02

  Yeah, yeah. Yeah, their channels thing will be really interesting to watch play out.

• 29:42Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 29:55David Rosenthal?

  Yep, it's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 30:12Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 30:27David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 30:51Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective. Then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 31:10David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 31:40Ben Gilbert?

  Truly insane numbers, and that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at lagora.com/acquired and just tell them that Ben and David sent you.

• 32:05David Rosenthal?

  All right. New, we'll move quickly here, but new segment for the show for episode two. We've already talked about-

• 32:16Speaker 02

  We need a little theme music for-

• 32:17David Rosenthal?

  Yeah.

• 32:17Speaker 02

  New segment.

• 32:18David Rosenthal?

  New segment.

• 32:22David Rosenthal?

  What, we've talked about this a bunch already, but you know, for you, Ben, what kind of broad themes in technology does the Facebook, Instagram acquisition kind of represent for you?

• 32:35Speaker 02

  Yeah, so I was thinking about this when, when you sent me earlier, your idea to do the new segment, and I was trying to think.

• 32:45Speaker 02

  You know, I think you did a really nice job in the last segment, kind of bringing in the app constellation theme. I think the other theme that this sort of opens up is that you really have to own the audience. And that, that sounds trivial and obvious at first, but I think what I mean by that is in any distribution channel, you have suppliers, you have a distribution, and then you have the audience. And with the rise of these services, it's becoming increasingly more important to own the default channel that the users go to for leisure, for distraction, for whatever

• 33:25Speaker 02

  it is, because in the, you know, near infinite nature of the internet, you can push whatever you want through that channel to reach that audience. And I think Facebook's core asset was- And still sort of is being that core place where people want to go and want to, you know, the first thing you want to do when you open your phone, when you have some downtime or whatever it is, you go there to be distracted. You go there for fun, you go there to see your friends, to see whatever you aspire to. And that, owning the channel, makes you the most powerful advertising platform in the world. And on top of that, makes you the most powerful

• 34:10Speaker 02

  a lot of other things in the world. I mean, we're seeing it now with Facebook Instant Articles and other experiments that we're playing with, but you can, you are a very, very powerful force in your business model and to other people's business models if you are the first step in dishing out who gets the attention after you. And I think Facebook saw that as an incredible, dangerous threat of people want to look at Instagram instead of us, and then they can start shoving whatever they want in that feed, even though that's kind of Instagram's model is to not clutter it up. They've managed to do a really nice job of taking that attention that they're getting as the front door of what you want to go look at and putting that where advertisers are appropriately putting their...

• 34:50David Rosenthal?

  Yep. It's, you know, I think this is one of the reasons why technology companies with advertising business models have become so much larger in terms of size and reach and revenue and value than old world advertising models. I started my career steeped in old world media and advertising. You know, I worked in media, technology and media, investment banking, and then I worked at a newspaper at the Wall Street Journal. But I worked when I was in banking, I worked on television and cable networks a lot. And their content and distribution were separate.

• 35:35David Rosenthal?

  You know, the distribution companies were the cable companies and the satellite companies, and they owned the distribution pipe. And the content companies were the cable networks, the AMCs, the scripts, you know, the, all the channels that you see on cable TV. And those were two separate things. And they both had their own advertising. They kind of, they, they shared the advertising pie, those two, those two stages of the value chain. And, and, and although television advertising was, and perhaps still might be larger than web, digital-based advertising as a whole, no one company could become as big as a, as a Google or as a Facebook has.

• 36:19David Rosenthal?

  Because Google and Facebook have, or at least Facebook has integrated, and, and through Instagram, integrated content and distribution within one single company, within one single app, or constellation of apps.

• 36:30Speaker 02

  Yeah, they are the channel. I mean, Facebook is the channel for where you go when you want social or downtime, or, you know, the variety of other services that Facebook offers, events and messaging and all that. And Google is, is where you go when you have intent.

• 36:44David Rosenthal?

  Yep. So for me, I, I think, you know, we've, we've talked about a few things throughout the episode. You know, we mentioned briefly technology waves, which is something that Ben and I talk a lot about, this concept.

• 36:58Speaker 02

  We should just do a whole episode.

• 36:59David Rosenthal?

  We should do, we should do a special episode on, on, on waves. But, but you know, the concept that in the tech world, there are these waves of technology that come every few years. And, and I think this is a perfect illustration of the wave of mobile coming in and washing over the desktop wave, but bringing with it a whole new, a whole new set of, of companies, of content and product models, of business models that may or may not have been implemented in the, at least domestically. But that's one. And then, and then the other one that, you know, I think is something I've been thinking about a lot lately in terms of technology themes, I think is the, the scalability and

• 37:44David Rosenthal?

  the leverage that Technology gives you, and I'm thinking in particular about the number of employees at Instagram. I mean, this is just incredible. Thirteen employees with 30 million users.

• 37:58Speaker 02

  Oh, oh, and on those 13 employees, we were looking on LinkedIn, too. I think 11 are still at Instagram.

• 38:03David Rosenthal?

  Something crazy like that.

• 38:06David Rosenthal?

  You know, which is not typical for technology acquisitions.

• 38:09Speaker 02

  Yet another example of Facebook doing an acquisition.

• 38:10David Rosenthal?

  Doing a great job here. But 13 employees at this landmark acquisition and today even at, you know, roughly 150 for 400 million users. And it's impossible to know how much revenue Instagram is generating today, but there was a great equity research report put out by Citigroup a year ago, almost a year ago, in which they valued Instagram at $35 billion. And this was when Instagram had not quite 300 million users.

• 38:41Speaker 02

  And what's Facebook's market cap?

• 38:44David Rosenthal?

  I don't know offhand. I want to say it's right around 200 billion.

• 38:47Speaker 02

  Yeah. So, I mean, that's what a ridiculous chunk, right? Acquired for $1 billion.

• 38:50David Rosenthal?

  It was less back then.

• 38:51Speaker 02

  Right, right.

• 38:53David Rosenthal?

  And, and, and in that report, they estimate that Instagram revenues are, could be on the order of about $2 billion. I mean, that's incredible.

• 39:02Speaker 02

  This year, right? Is it 20, I think it was maybe summer 2015 to 2016 or something like that?

• 39:07David Rosenthal?

  This, this year, they estimate, last year, Citigroup estimated $2 billion in revenue for Instagram this year in 2015. To do that with 150 employees is incredible. And then, and then WhatsApp, which, you know, came later, something like 50 some odd employees. You know, acquired for 20 plus billion dollars.

• 39:26Speaker 02

  I would, I'll, I'll raise the, the flag here and say not really fair to do the, the revenue calculation for the ad network since they're piggybacking off of Facebook's ad network, and I'm sure that takes a lot of engineers.

• 39:37David Rosenthal?

  True, true. But I think about the leverage that is possible with technology and technology companies versus, again, old world media where, where I, I spent time earlier in my career. Nowhere near that kind of leverage that you can get.

• 39:58David Rosenthal?

  All right, let's wrap up.

• 40:00Speaker 02

  Conclusion time?

• 40:01David Rosenthal?

  Conclusion time.

• 40:05Speaker 02

  Acquired for a billion dollars, December of last year, externally valued at 35 billion, even ignoring the fact that that's based on, you know, there's $2 billion in revenues this year. This is like not grasping at straws. This is a very real revenue product. And in fact, when it was acquired, I don't think it had revenue. They had no ad platform. They had no...

• 40:29David Rosenthal?

  Nope. Nothing.

• 40:30Speaker 02

  Pretty incredible what they've done since acquired. 35x multiple post-acquisition on that property alone. Not to mention all the ancillary benefits of potentially steering Facebook as a whole organization in the right direction on mobile. I mean, do I get a plus? It's an A+.

• 40:48David Rosenthal?

  I was, I know we need more disagreement on this show, but man, A+ for me, too. This might, this might even be the very, from a, from a

• 40:59Speaker 02

  From a multiple?

• 41:00David Rosenthal?

  Return standpoint, even just straight financial returns, this might be the very best acquisition in technology history.

• 41:09Speaker 02

  I'm curious, is there ever, what is, how small of a scale do you have to go down to to get something that was a 35x multiple in three, is it three years?

• 41:17David Rosenthal?

  I mean, bungy, perhaps.

• 41:20Speaker 02

  Foreshadowing.

• 41:22David Rosenthal?

  That'll be an interesting episode. By the way, listeners, if you have requests, suggestions, comments, thoughts, as we said, but

• 41:32Speaker 02

  Yeah, if you can think of companies we haven't.

• 41:34David Rosenthal?

  That we haven't, please send our way. We'd also love to have some guests on this show.

• 41:39Speaker 02

  And by send it our way, there's Twitter. There's also a little feedback form on our site where you can submit stuff.

• 41:43David Rosenthal?

  We'd also love to have guests. If you have a particular insight into a great technology acquisition in history, that either, you know, you were part of it directly, or you worked on it as part of a third party, and you want to be on our show, shoot us a note.

• 42:03Speaker 02

  About done here?

• 42:04David Rosenthal?

  I think we're about done.

• 42:05Speaker 02

  All right. Thanks, everyone.

• 42:06David Rosenthal?

  We'll see you next time.

• 42:27David Rosenthal?

  All right, listeners. Now is a great time to talk about one of our favorite companies, Statsig.

• 42:33Ben Gilbert?

  Yes, there is a reason why the best product teams rely on Statsig, whether they are iterating on their core product features or shipping AI-powered experiences at scale.

• 42:44David Rosenthal?

  Yep. In the crazy speed of today's AI world, shipping fast is just table stakes now. It's basically trivial to build and deploy your app constantly. The real advantage is how quickly you learn what changes actually created value for customers and how fast you can use that signal to guide what you ship next.

• 43:04Ben Gilbert?

  This is where Statsig comes in. It brings experimentation, feature flags, and product analytics into one unified system so teams can ship safely, test rigorously, and directly link what they changed to how users actually behaved.

• 43:17David Rosenthal?

  So if you want to make learning your competitive advantage, whether you're building new AI experiences or just evolving your existing core product, go to statsig.com/acquired to get started.