Instagram Revisited (with Emily White)

We enter the wayback machine and revisit the subject of Acquired’s second ever episode, Facebook’s bombshell 2012 acquisition of Instagram — this time with the help of then-Facebook executive Emily White, who moved over post-acquisition to become Instagram’s first business head. Together with Kevin and Mike, Emily helped build Instagram's business model, which today accounts for nearly 1/4 of all of Facebook’s revenue. Is this still Acquired’s canonical A+ with an extra 3.5 years of hindsight? Spoiler alert: yes. 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 Carve Outs:Ben: Sam Harris on the Joe Rogan Experience: https://www.youtube.com/watch?v=RJ5_hAEsLkUDavid: Boom Town by Sam Anderson: https://www.amazon.com/Boom-Town-Fantastical-Basketball-World-class-ebook/dp/B077RHYC4G

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

• 0:00Ben Gilbert?

  I can't believe that InstaWalk tours were a thing. Like, Facebook employees were lad around campus to use Instagram and take pictures of things after the acquisition to learn how to use it.

• 0:24Ben Gilbert?

  Welcome to season four, episode three of Acquired, the podcast about technology, acquisitions, and IPOs. I'm Ben Gilbert.

• 0:32David Rosenthal?

  I'm David Rosenthal.

• 0:33Ben Gilbert?

  And we are your hosts. On our second episode ever, way back in 2015, we covered Facebook's acquisition of Instagram. And in fact, it's the canonical example of an A+ that we use on our show. So today, we'll dive into the integration itself, how Facebook spent $1 billion to take something from zero revenue to an app responsible for almost a quarter of all of their revenue today. And we are super

• 0:59David Rosenthal?

  It's amazing.

• 1:00Ben Gilbert?

  Yeah, right? We are super lucky to be joined by the one and only Emily White, who played an important role in making this all happen. So who is Emily? So Emily today is a venture investor and the president of Anthos Capital in Los Angeles. But previously in her career was a longtime executive at Google, where she joined very early, pre-IPO. She worked with Sheryl Sandberg for 10 years, and she then continued to work for Sheryl by moving to Facebook in 2010. And then, the topic of today's episode, joined Instagram post-acquisition as their first business executive. She was tasked with building out the business model, which, spoiler, she did a pretty good job, and then became COO of Snap before transitioning full-time over to what David

• 1:43Ben Gilbert?

  wrote in the notes as "the dark side of investing," and now sits on the boards of Lululemon, Graco, Honey, Hyperloop One, and the X Prize. Welcome, Emily, and thank you so much for joining us.

• 1:55Speaker 02

  Thank you for having me.

• 1:56Ben Gilbert?

  Yeah, you bet. So Emily, I think there's a good chance that you are the only person in the world who has worked at Google, Facebook, Instagram, and Snap. Do you know if that's true?

• 2:05Speaker 02

  I think it's, I think that's true. At least, when I left Snap, that was true.

• 2:10Ben Gilbert?

  Wow.

• 2:11Speaker 02

  I can't think of anyone else who's done all of those. I brought a couple of folks from Facebook with me, but yeah. I know.

• 2:16David Rosenthal?

  It's a pretty exclusive Venn diagram.

• 2:20Speaker 02

  If I'm good at one thing, it's seeing around corners.

• 2:24Ben Gilbert?

  Yeah, we'll definitely get into that in the show. I think it's been pretty apparent from your journey. So listeners, you know that a few months ago, we started our limited partner program for folks that want to go deeper on technology, startups, and other VC topics with us. So for LPs, we will have an additional segment with Emily after this episode, where we'll cover what Emily and Anthos are looking for in their investments, what it was like to work with Sheryl Sandberg, and her experience serving on public company boards. And if you would like to become a prestigious acquired limited partner, you can do so by clicking the link in the show notes or going to kimberlite.fm/acquired. All right, listeners, now is a great time to tell you about a longtime friend of the

• 3:05Ben Gilbert?

  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.

• 3:19David 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.

• 3:40Ben 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.

• 4:02David 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.

• 4:20Ben 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.com/acquired for $1,000 off, and just tell them that Ben and David sent you. All right, David, it is time to do what you do best. Take us in, set the scene, what was happening in the world? And how did this deal go down?

• 4:56David Rosenthal?

  Well, it's so funny, you know, of course, we re-listened to episode two of acquired in preparation for today.

• 5:02Ben Gilbert?

  Which is a little rough.

• 5:03David Rosenthal?

  It's a little rough. And we realized there was one glaring thing missing from it, which was no history and facts. Today, we're going to do a brief history and facts. And, and then we're going to get to the meat of, of today's episode, which is talking with Emily about building the business model at Instagram. But to start quickly and make up for the lack of this in episode two, we're going to go back to a very specific time and very specific place in history, which is Friday, April 6th, 2012, at Mark Zuckerberg's house in Menlo Park. Actually, it's in Palo Alto, California. I remember driving by it many times. Facebook is one month away from its IPO roadshow. It's legendary IPO process is about to kick off.

• 5:48David Rosenthal?

  They're planning to raise $10 billion in one of the largest IPOs ever, hoping for about $100 billion valuation. The company is abuzz. Everyone is working like crazy and it's actually, it is Friday, April 6th. It is Good Friday. Easter is on Sunday, but I suspect Emily can correct us, tell us if this is true or not. Everybody's probably ready to work through the weekend anyway, because I imagine this is a pretty intense time at the company, right?

• 6:14Speaker 02

  Yeah, I would say so.

• 6:18David Rosenthal?

  Despite the holiday, something changes that day, though, which is Mark gets a piece of news that would indeed change the course of history and change the course of his weekend. He found out that Instagram, the hot new mobile photo sharing app, which had been on his radar screen for a few months, on the company's radar screen, and had just launched on Android the previous week, adding a million users in, I don't know if it was the day or the week.

• 6:43Ben Gilbert?

  I don't know. It's still mind blowing to me that this all sort of happened right around the same time.

• 6:47David Rosenthal?

  I know.

• 6:48Ben Gilbert?

  The Android launch, the acquisition, the funding round.

• 6:52David Rosenthal?

  So Mark and Facebook find out that Instagram has an acquisition offer on the table from Twitter. I knew this, but I had completely forgotten this. I think many people forget about this.

• 7:02Ben Gilbert?

  Yeah, I actually, it's funny, I was, I was reading through your notes and I was listening to episode two this morning and just thinking about like, oh my God, that almost happened.

• 7:12David Rosenthal?

  Yeah.

• 7:12Ben Gilbert?

  What a different world we would live in today.

• 7:14Speaker 02

  Absolutely. So obviously I was at Facebook at the time, so I didn't have insight into this, but hearing about it after the fact, I don't know, I think good things happen often really quickly and it all came together for them so fast in an unexpected way.

• 7:28David Rosenthal?

  Yeah. So Instagram, the company, had literally that week closed their Series B, raised $50 million from Sequoia and acquisition offer on the table from Twitter for 525 million. Now, this must have been a particularly salient piece of news for, for Mark Zuckerberg and Facebook because a few years earlier, also another thing that is, is public knowledge, but most people don't know, Mark had offered to buy Twitter for just about 500 million a few years earlier. And now here is his former-

• 8:00Ben Gilbert?

  That's another thing I forgot about.

• 8:01David Rosenthal?

  Former acquisition target that is about to buy his current, you know, potential future competitor. And he's determined that history is not going to repeat itself here. So he does the only thing he can think, which is he calls Kevin Systrom, CEO of Instagram, invites him down to his house in Palo Alto and makes him an offer, one would say that he can't refuse, a billion dollars, 300 million in cash and 700 million in Facebook stock, which, you know, as, as we all know and-

• 8:36Ben Gilbert?

  Yeah, I'll take the Facebook stock.

• 8:37David Rosenthal?

  Yeah, it covered in the Facebook IPO episode. Looked like a bad deal about, you know, six months later, but ended up being a great deal and worth a lot more than a billion dollars in the long run, in many ways because of Instagram. So Kevin receives this offer at, at Mark's house. He had driven down, Instagram's office was in South Park in San Francisco, which also had been the birthplace of Twitter famously. Jack Dorsey came up with- As legend has it, the idea for Twitter in South Park in San Francisco. Today, it is Sand Hill Road North. All the VC firms that used to be in Menlo Park now have their offices in South Park in San Francisco. But Kevin had driven down. He calls his co-founder Mike Krieger,

• 9:18David Rosenthal?

  who's back up in the office and says, hey, I need you to meet me down here. Can you take the Caltrain? So, South Park is right next to the Caltrain station in San Francisco. Can you take the Caltrain down to Palo Alto? Let's meet here and we'll drive back up to the city. I've got some news we gotta discuss.

• 9:32Ben Gilbert?

  So he had left Zuck's house at this point. It wasn't like, I'm gonna hang here at Zuck's house for an hour.

• 9:36David Rosenthal?

  Apparently, yeah, he was sitting on the bench at the Caltrain station in Palo Alto, you know, contemplating his life and future. And Mike shows up on the train. They drive back up to San Francisco and by the end of the drive, as legend has it, they've decided to take the offer. So that sets in motion a chain of events, what really sets in motion a chain of legal firms that work like mad throughout the weekend, throughout the holiday. And on Monday, April 9th, the world changes, bombshell announcement. And I said this on episode two, I'll say it again, I remember the exact moment when I heard this news because this was, I mean, now it seems quaint, almost a billion dollar acquisition, but like this didn't happen back then. This was the first, you know, the term unicorn didn't exist.

• 10:21David Rosenthal?

  This was a huge moment.

• 10:23Ben Gilbert?

  Did this coin it? What created the phrase unicorn?

• 10:25Speaker 02

  No, actually, I think that was Aileen from Cowboy Ventures who had done a piece for, what was it, TechCrunch or something?

• 10:32David Rosenthal?

  It was TechCrunch. It was the next summer.

• 10:34Speaker 02

  And she had come up with the term.

• 10:36David Rosenthal?

  Yeah. But at this moment in time, you know, this was a huge valuation for a photo sharing app with no business model, no revenue, just bleeding money and server costs, you know, and people really thought, you know, this was heading right into the IPO roadshow. People thought, you know, this is an example of a crazy young founder out of his mind with too much control of his company. Like, how could you make such a rash decision in a weekend?

• 11:01David Rosenthal?

  Turns out that the haters were wrong. Today, you know, we basically all know what happened since then in last year in 2018. Facebook does not disclose Instagram revenue broken out separately. However, analysts estimate that the Instagram itself did about eight to nine billion dollars in revenue. It is predicted to grow by another almost 50% this year to 14 billion dollars. And that would be almost a quarter of all of Facebook's revenue. So I think that pretty good ROI on that acquisition. But that's what we're here to talk about with Emily, which is how did, you know, this company, which was famously 13 people, no business model, no revenue, this product when, when Facebook bought it.

• 11:46David Rosenthal?

  How did you and the team build what would become 14 billion dollars of revenue today?

• 11:51Speaker 02

  Yeah, so I remember that Monday too.

• 11:55David Rosenthal?

  Did you know about it over the weekend?

• 11:57Speaker 02

  No, no, no one knew about it. I don't, I'm not even sure the board knew about it. It moved really quickly and I think internally we had a moment of wow, this is incredibly cool that our founder has the ability to spot things like this and move so quickly to put them together. Because you have to be incredibly aggressive in a situation like this. And you also have to have the ability to, he has obviously an incredible sense of what works and what's new. And Instagram had been sort of on the radar, but in a really small way. And so the, I mean, I think it was, I want to say it was like 13 or 16 people at the time.

• 12:36Speaker 02

  It was tiny. It was something that some people at Facebook, some of them Facebook employee population used, but not a ton. But Mark got it immediately and acted really aggressive to make it happen. And of course, the challenge is once these things are announced internally, you've got to sit and twiddle your thumbs for months as they're undergoing review. So the reality is that we actually didn't even really incorporate Instagram into our day to day until. I want to say it was much, much, much later that year.

• 13:06Ben Gilbert?

  And, and did people at the company in that time after you had announced the acquisition, but before you could start doing any integration work, did people start using it? Did people believe, how did people start to believe that, you know, Instagram was, was, you know, something that, you know, they should really believe in as a Facebook community?

• 13:23Speaker 02

  I don't think it was on the radar in that way at all. I think it was, wow, that was really cool that we just did this. Now back to work. And so, to be honest, I think everyone just put their heads back down and kept working, right? We had just a ton of things, answers that we didn't have. And there was in some ways sort of no use in even preparing for it because we didn't know what it was going to look like. It was going to take a while anyway, so.

• 13:43David Rosenthal?

  So you were running mobile partnerships at Facebook at the time, right? Like, had Instagram been on your radar screen, like?

• 13:50Speaker 02

  You know, I, I had heard about it, but honestly, I wasn't even using it at the time. And I left, what was it, in late August to have a baby. And Instagram had still not, sort of come, not closed at that point. But I came back a handful of months later and they had just arrived. It was really the first acquisition that Facebook had done, not just for the people, which are typically called Aqua hires, right? But an acquisition for the people and the company, the underlying product. And while Mark knew that, I'm not sure that many other people really knew this. And because of our lack of experience in this world, they had sort of moved those 13 or 16 people into a corner of one of the buildings.

• 14:33Speaker 02

  I think they had thrown some engineers over the wall. But I got involved.

• 14:38David Rosenthal?

  Because they moved the team down to Menlo Park, right?

• 14:39Speaker 02

  They moved the team to Menlo Park, which of course, they weren't totally excited about.

• 14:44Ben Gilbert?

  Did they like negotiate for, hey, we need to be separate in some capacity? Or do you remember like, how did it work, kind of going back and forth on, well, we need to be separate and be our own team versus we want to be, you know, a part of the Facebook family in some way?

• 14:58Speaker 02

  Yeah, I have to tell you, my sense of the things, and, and I wasn't on the inside when I was on maternity leave, listening to the level of conversation. My sense is that no one really knew. We knew that they had to come down and they would, they would be leveraging what Facebook built, but beyond that, it was pretty unclear. So, so I got involved when I had come back from maternity leave. And I think it was Dan Rose, who has just left the company, said, listen, you know, we've acquired Instagram, they're sitting over in this corner, and they're having some challenges on the business side. You should go spend some time with Kevin and see, you know, there's, there's maybe some opportunity to help him. What had just happened, I think before, like maybe the week before, was that Facebook lawyers had gotten a hold of the terms of service that Instagram had and rewritten it.

• 15:42David Rosenthal?

  I was gonna ask about this.

• 15:43Speaker 02

  And they rewrote it with a very Facebook frame of mind, which was, we want the ability to use this user-generated content in future ads, you know, future ad content. And of course, they did that with-

• 15:57David Rosenthal?

  The community revolted.

• 15:58Speaker 02

  Exactly. I mean, that was such a Facebook way to approach the, the situation. And Instagram users were not having it. And they, they really did revolt in a pretty beautiful way, and made their, made themselves known. And I think for us, and for me, being very arms distance at the time, it was a realization that like, this is actually a very different company with a different meant user mentality. And this, we really need to understand it. And understanding it does not mean taking the Facebook playbook and throwing it at them. Understanding it means getting inside there, understanding the spirit of the company, what makes it so special. And it was sort of through that process that I went, I underwent, and I think the team underwent at the same time, we really understood what Instagram's

• 16:41Speaker 02

  voice was, and the importance of maintaining a separate identity.

• 16:45David Rosenthal?

  And we're gonna dive much deeper into that, but I, we have to ask before then, back on the Facebook side, you know, when all this went down, mobile and Facebook were like, I mean, you must have had a really interesting vantage point running mobile partnerships, but these were the HTML5 days, right? Like, mobile was not native to Facebook, let's put it that way. I mean, this must have been-

• 17:07Speaker 02

  Yeah.

• 17:08David Rosenthal?

  -culture clash.

• 17:09Speaker 02

  Yeah. I had gone over to work on the mobile efforts in 2011. And I think we had one iOS engineer at the time.

• 17:17David Rosenthal?

  One iOS engineer in all of Facebook.

• 17:20Speaker 02

  Yeah, it was bad.

• 17:21David Rosenthal?

  Four years after the iPhone had come out.

• 17:23Speaker 02

  Isn't amazing. Wait. Um, yeah. The web had done so well. And I think everyone saw it coming, but when you have a company that's, I mean, even at size of Facebook, that I'm with thousands and thousands of people, there's a DNA change that has to go on, even to make a platform change that now seems so simple and so obvious. You know, it really meant that, you know, Mark had to start every product conversation, product review with, show me mobile first, right? I don't want to see your web anymore. I don't want to see desktop. I want to see mobile. So changes like that are things that we really had to, had to do every day in every opportunity to make sure that mobile became part of everyone's job and not just, not just a sort of small select team.

• 18:06David Rosenthal?

  I mean, it makes sense. Like Facebook was built at that point to, you know, the hottest company on the planet in a prior generation. It's totally understandable why like the company and everyone focused on that product, you know, other than Mark at that vantage point would be thinking like, what is this mobile, you know, we're the big gorilla here.

• 18:27Speaker 02

  Yeah.

• 18:27Ben Gilbert?

  I'm curious, Emily, a lot of times in acquisitions like this, the, there's value destruction that happens because the team at the big company that is doing something most similar to the startup they acquired is allergic to it, even though, you know, upper management believes that acquiring the startup was the right idea. And so they like do everything they can to kill it. Was there any clash with the photos team who sort of looked at Instagram and thought it was competitive or thought it was, you know, the wrong strategy or anything like that?

• 18:54Speaker 02

  You know, oddly, no. I never, I never witnessed or heard anything like that. I did, and I think I told you guys this as we were prepping, as I was getting to know Kevin and sort of falling more and more in love with the product and his brain and, and his vision for it. And he and I had started talking about me coming over and joining him. I talked to some friends at Facebook and I got reactions like, why would you do that? That's like joining Facebook Photos. Or I was told several times that I shouldn't take the job because it was too small for me. That actually resulted in me, I think I, I think I told Kevin twice or three times, no, I just was like, no, I, you know, I think I need to continue to focus on mobile. I'm being told that it's the place I need to spend my energy.

• 19:39Speaker 02

  And I remember driving home one evening, Oprah had just come actually to Facebook and talked to our, our, our employee base and she had ended the conversation.

• 19:48David Rosenthal?

  Of course.

• 19:49Speaker 02

  Of course. Amazing piece of advice that really sat with me that night, especially on the drive home. She said, listen to your whispers because if you don't listen to your whispers, they become screams. And I was like, what am I doing these? All I want to do is go work on Instagram and we're about to piss away not only a billion dollars and an amazing team, but really the opportunity to disrupt ourselves. And it's a really big struggle. I mean, in disruptive companies to maintain that DNA when you're large and have the ability to say, you know what, there's going to be another generation that is going to sort of take over what we've built and we want to create the playground to have that, that disruptor

• 20:32Speaker 02

  be in our, in our home with us is pretty mature. And I'm not sure, again, everyone got it. And so for me, it was a pretty big aha moment and, and what drove me back in the next day to, or the next week, I should say.

• 20:46David Rosenthal?

  You called Kevin at that point or probably went across the wall to see him and.

• 20:50Speaker 02

  Um, you know, I, so this was a Friday night, I think on, on Monday I went into the exec seat and told me it was this, the job was too small and I said, you're, you're wrong. Actually you're wrong and here's why I think you're wrong. And they said, I think you're right. Like this is the right move and go for it.

• 21:04Ben Gilbert?

  I bet there's a lot of listeners out there who have at some point while working at a big company, had this realization of, oh, we need to disrupt ourselves and I think I know how. And in most cases, there's no way to act on it and, and certainly they're not going to get executive support, but it is amazing here with the billion dollar bet, you having these whispers and, and realizing, you know, this, this is, you know, this is something that not only should we kind of bet the company on, but I'm going to bet a lot of my career and reputation on, but you had. Mark Zuckerberg supporting the idea that the company should do that. So you were able to actually go and get that done.

• 21:38Speaker 02

  Yeah, this is a huge issue for companies. I mean, I being at Google for 10 years, I saw this all the time, right? If you can put a dollar into one business, your main product and get $5 out. When you're developing a new product, you're putting a dollar and you're getting 70 cents out, or you're putting a dollar and you're getting 120 cents out, right? And I'm not just talking about dollars. I'm talking about engineers. I'm talking about, right? Headcount and the whole ecosystem that goes along with building a business. And so time and time and time again, when you look at this from a high level, you say, why the hell are we investing in this other business? Because our core one is doing so well. So it's, it makes it incredibly hard. So the bar is so unrealistically high for

• 22:22Speaker 02

  new businesses. So it really does take often a dramatic acquisition. Frankly, a lot of times, like Google is a good example of this. They grow through acquisitions because it's too hard to get the early traction that you need to prove that this is a place you should continue to spend your resources.

• 22:36Ben Gilbert?

  Yeah.

• 22:38David Rosenthal?

  So that's a good.

• 22:39Ben Gilbert?

  Yeah, I was gonna say, speaking of, of building the business, David, you want to take us into?

• 22:43David Rosenthal?

  Dollars in and dollars out.

• 22:44Ben Gilbert?

  Yeah.

• 22:45David Rosenthal?

  How, I mean, at this point, there's no business model. There's no revenue model. There are no ads in Instagram. Brands are on Instagram, but it's all organic.

• 22:54Speaker 02

  Right.

• 22:55David Rosenthal?

  It's all brand managers at companies posting, you know, posts on their own. How did you even start with Kevin to think about what to do here? I mean, because we're sitting here in 2019, it seems obvious that, that the model you chose was right, but it wasn't obvious at the time. Like even Facebook's first advertising model, you know, famously was just display ads on the side of the webpage, and that was terrible. It was years until they figured out the news feed. You know, how did you guys start to approach the problem?

• 23:24Speaker 02

  Yeah. Well, the first question is, do you have to make money? Right? And that's the question that we debated with ourselves and with a bunch of people at the company. It's like, do you really need to make money? I like making money on AdWords at Google. Been in that business for a long time. I know it. Kevin and I sort of came to the place where I think we knew that we wanted to make money because if you make money, you can write your rules. You can write your own rules, right? It's easier to try. It's easier to make the case for headcount. It's easier to have a voice within the company. And of course, we were at this point now, a very small company in a very large company, or at least a medium sized company that had a lot more people than we did. And it was shortly after I arrived, I don't know,

• 24:05Speaker 02

  a handful of months, that we hit the 100 million user mark. So at that point, we were sitting on top of a company that had the infrastructure and talent to help us monetize relatively quickly compared to how we had to do this on our own. We had the user base that we needed in order to actually make a viable business. And we knew that we wanted sort of power and control and the ability to write our own future moving forward. And so it really made sense that we were going to start with advertising. We also knew that the model that was going to work on Amazon, on Amazon, on Instagram.

• 24:41Ben Gilbert?

  Amazon also has advertising. Could also be foreshadowing of Instagram's future business model.

• 24:47Speaker 02

  It gave us opportunity to do something pretty different in the ad space, namely around using mobile to actually complete a purchase. And the people were coming to Instagram with a different perspective. Products were showing up in a different way. And it seemed to us, even at that time, that giving users the ability to buy through Instagram ads could be a really killer ad format down the road. But that mobile infrastructure, I mean, it's funny, we talk about payment, it didn't exist then, right? Mobile websites were good enough.

• 25:21Ben Gilbert?

  Did Stripe even exist at this point? Apple Pay certainly didn't. Yeah.

• 25:24Speaker 02

  Yeah, no. So we knew that we needed to give the industry some time to mature. And so actually, starting with the ad formats that we did, made a lot of sense as the very first step in a journey. And we knew that we were heading down that path, and that the beginning was just that, it was the beginning. So, you know, sometimes, I mean, I would say at Google with AdWords, actually, we got relatively lucky that early on, we sort of landed on the ad format that ended up being like the ad format that's still there today.

• 25:52David Rosenthal?

  Maybe the best ad format of all time.

• 25:55Speaker 02

  Pretty good ad format. It's done well. I mean, this was fun, right? This was really fun. We had, we had visual. We launched video another, maybe six months after that. So it was a very rich ecosystem for really the next generation of ad formats and marketplaces. So.

• 26:12Ben Gilbert?

  So Instagram as a product was known for being Spartan and beautiful and focused on the content. Ads on Facebook at the time were not that.

• 26:24Speaker 02

  Right.

• 26:25Ben Gilbert?

  At, at least if you generalize it. How did you go about making sure that you didn't ruin something beautiful on Instagram by starting to introduce the Facebook's business model to it?

• 26:34Speaker 02

  Yep. So we made that the number one priority, actually. We knew, and we knew, by the way, just looking at what happened with the Terms of Service, that pissing off our user base was not the way to go. And that we had something pretty precious and we were going to treat it that way. And we are in an advantageous position, as I mentioned earlier, of not having to make money, meaning we didn't have to pay the bills. So we could take our time and move slowly and be really thoughtful.

• 27:04Ben Gilbert?

  Which is Facebook's mantra.

• 27:05Speaker 02

  Right, exactly.

• 27:08David Rosenthal?

  Obviously not.

• 27:09Speaker 02

  It was an amazing luxury that we had and most companies don't have it. And so we spent a lot of time looking at what content was going up, how users felt about it, what brands were already sort of natively acting on the platform and how users were reacting to them and decided that we were going to place ads in the feed, which was also, as you can imagine, sort of a controversial moment because it's prime real estate, but it's also when you're in an ad business, you need distribution. And that's where distribution was going to happen. But we were going to do so in a way with brands that were already really elegantly playing on the platform

• 27:47Speaker 02

  and had good user interactions. And we were also going to do it in a very sort of one-off way, meaning every single piece of content that came in was approved by us and Kevin. And that, and Kevin, and that went on for a long time. So we were like hand curating this stuff and paying it really close attention.

• 28:07David Rosenthal?

  Wow. Yeah, the first brands were, well, Michael Kors, I think, was the first ad on Instagram. And then you had Levi's, W Hotels, Macy's, Lexus, PayPal.

• 28:18Speaker 02

  General Electric was in there, too.

• 28:20David Rosenthal?

  Oh, interesting. And Ben and Jerry's. That's perfect.

• 28:25David Rosenthal?

  I'm actually curious on PayPal, if you remember, like, how, that's not an obvious, like...

• 28:30Speaker 02

  You know, I have to tell you, I don't remember the PayPal one, like, really specifically. I wish I could speak to it.

• 28:35David Rosenthal?

  I can't remember exactly what it was, but it might have been for mobile payments. Anyway.

• 28:40Speaker 02

  We, again, we went, we went back and we said, who is really using this? So, I mean, it's, it's, um, looking back at it, it seems like the most amazing opportunity for a marketer to participate in something this early. But remember what the time was. I mean, it was like, okay, we don't want to be the first advertisers because what if they hate it? What if there's backlash, right? I remember actually having a challenge with GE because they had gotten some, they had such a beautiful Instagram presence. But when they started advertising, they, the users didn't love it. It was in part because we, it was one of the first ads and it was like, wait a second, now you're clogging your feet with this stuff.

• 29:14Ben Gilbert?

  This is the place where I go and dump all my purchases.

• 29:16David Rosenthal?

  There are comments on ads, right?

• 29:18Speaker 02

  Right, and there are comments on us, exactly. And we were basically treating them like organic content that was sponsored tag, right? So, and more distribution. So there, there really is some headwinds. You have to find marketers who are willing to go down this, go down the road with you and take some risk and believe in what you're doing well enough to sort of get over some bumps. And so we really looked at who was doing really well on Instagram already and who are the teams that were leaning into this and would be good partners for us along the road, along the way.

• 29:48Ben Gilbert?

  It's interesting thinking about, also in retrospect, I mean, the business model of, okay, we just bought the fastest growing sort of inventory pool available. We have all these advertisers that are trying to push more and more ads to more and more slots or available inventory. It makes so much sense to just enable that dashboard to also push to this new sort of slot pool that is Instagram.

• 30:14Speaker 02

  So tempting, huh? Not going to do it.

• 30:16Ben Gilbert?

  And I mean, that's effectively... What it is today, there's zero, I mean, we at PSL all the time, we're buying ads and like you click another box. In fact, for acquired, we've done some ads, you check another box and like boom, the same thing goes on Instagram and Facebook. And there's no real way of of sort of quality controlling one or the other. How did you think about like, what features of the ad dashboard? And in what way to actually let people who are using the ad dashboard tool? Put ads into Facebook beyond like, I'm sorry, into Instagram beyond actually hand curating every single one?

• 30:52Speaker 02

  So that's a tricky question for this because I left in the beginning or the very end of 2014. So the actual dashboard integration happened after I left.

• 31:03David Rosenthal?

  It wasn't until self serve at all didn't exist till 2015.

• 31:07Speaker 02

  It took a while.

• 31:08David Rosenthal?

  That's a great point.

• 31:08Speaker 02

  Yeah, it took a while. So we were really in the like hand curating, hand posting, hand reporting phase. And I think the other point that's worth making here is it's sort of what was happening internally and culturally at Facebook and Instagram at that time. So as I mentioned, it was the first time we had acquired a company for the for both the talent and the underlying technology. And the Facebook community didn't really, the group of people who worked there didn't really understand what that meant. Specifically, let me just give you some examples. You know, besides the lawyer going and and sort of, you know, changing the terms of service.

• 31:51Speaker 02

  Teams generally just wanted to do exactly what they were doing for Facebook. The recruiting team wanted to do what they were doing for Facebook. The policy team wanted to apply Facebook's policies, right? Everything was just like, okay, let's just integrate them right now. And so really, my first week or two on the job, Kevin and I had like locked ourselves in a room. And we mapped out Instagram's mission, vision and values. Specifically because we knew that it was important that this thing was, it was big already, but it was going to be much bigger. That it was really important that we maintained our own identity and control over how the product moved forward. And that we were also making it really clear from the employee's perspective, like what is Instagram and what is Facebook?

• 32:36Speaker 02

  And how do you plan these two different worlds, right? We wanted people's help, but we couldn't let them smother it. That was the beginning of realizing what Instagram was inside of Facebook instead of Instagram becoming Facebook. Now, of course, as you read the news, there is actually a real momentum, it looks like, inside of Facebook to make Facebook and Instagram and WhatsApp all sort of one thing.

• 32:59David Rosenthal?

  Yeah.

• 32:59Speaker 02

  But I think for the beginning.

• 33:01David Rosenthal?

  Yeah, I mean, there's an alternative history where Instagram became Facebook mobile photos app, right?

• 33:07Speaker 02

  Right, yeah, no, it could have happened. In fact, one of the first things I did is, Facebook had maybe six or 12 months before bought an app that was a data compression app. So users all over the world were downloading this app on their phone and it was lowering their phone bill effectively. And in exchange, it was giving information about what those, what users were doing on their mobile phones, right? So I actually, we had access to this, I could go see, okay, of all of the Facebook employees, how many are actually using Instagram? And it turned out that the same percentage of, and I can't remember the exact percentages now, but basically the same percent of the United States that was using Instagram was

• 33:51Speaker 02

  the same percent that Facebook, of Facebook employees that were actually using Instagram. The point here is that was very low. It was like in the, you know, low teens or something like that.

• 33:59Ben Gilbert?

  And this was after they'd hit the 100 million user mark.

• 34:02Speaker 02

  This was just before that, yeah. So Instagram was, had been acquired, it had been, the team had moved down, but still, people were so focused on Facebook, right? I mean, as you do. And, and so really, you know, between the mission, vision, values, and then really like an on-campus marketing campaign where we started doing Insta walk tours around the campus and got up and started talking at all hands meetings and thinking about our product launch separately and going to the board meeting and sort of just talking about what Instagram was and what made it special and how it was different. And really, the ad strategy in part rolled out out of that, right? How do we create a product experience that feels really authentic to this platform?

• 34:46Speaker 02

  And through that also make a stance about our ability and, and requirement in some ways to build something that's unique for this platform and not just slap Facebook ads onto the user experience, which I think at that point would have been really rough.

• 35:00Ben Gilbert?

  Yeah, it's like philosophically, how do you make sure that the people who are going to be designing those experience for that platform actually use that platform? Yeah, that's a great point.

• 35:07Speaker 02

  Yeah.

• 35:08Ben 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.

• 35:23David 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.

• 35:37Ben 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.

• 35:46David 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.

• 36:04Ben 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.

• 36:20David 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.

• 36:37Ben 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?

• 36:46David 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. What are the components of building an ads business? You know, that obviously you did at Instagram, but you saw it at Google, you saw it at Facebook. You know, one of the only people, if not the only person in the world who's done this four times. Like, what are the pillars of this business?

• 37:10Speaker 02

  Yeah. Well, it also, it's changed so much in that period of time, right? I mean, when, when Google started, I remember it actually really did not care about making money. If you guys remember those days.

• 37:22Ben Gilbert?

  Hire smart people, have the fastest search results, and nothing else matters.

• 37:25Speaker 02

  Exactly, pretty much. So, so I joined Google at the very beginning of 2001, when AdWords was, you know, like 500 advertiser, advertising beta.

• 37:36Speaker 02

  All, you know, based on what was it CPM ranked on the right side and had the luxury of growing at a time when nothing like it existed. I mean, you had Overture at the time that was doing some interesting stuff on the algorithmic side, but Google, for the first time, really married this incredible web presence, right? I mean, they just had traffic coming under their ears with a very intent-based user experience, right? People are telling you what they're looking for. And so the opportunity to serve up content. And they, they really took advantage of that opportunity by saying, this is not just brand marketers who can do this. This is anyone.

• 38:15Ben Gilbert?

  Right.

• 38:16Speaker 02

  And they didn't get that initially. They actually built AdWords originally, as I mentioned, as a CPM product. So everyone who showed up at the top right had to pay $10. Everyone underneath them had to pay $8, $10, no, it was at 12, 10 and 8 per thousand views. And that-

• 38:34Ben Gilbert?

  Wait, so no auction?

• 38:35Speaker 02

  There was no auction early on. There was no auction. And I would say like a year, year and a half in, the auction came about. So we added, we added in the component of actual click-through rate. So how well were these things performing? And then we added an auction in. So it allowed businesses with wide variety of margins to come and participate all of a sudden. Because when you have a set CPM, you're crowding out 90%. You're only letting, you know, a very specific set of advertisers bid. And so we didn't have anyone bidding for, you know, sheet paper music or Persian rugs, right? We had a ton bidding for like mesothelioma ads or whatever. So it really was, you know, sort of a stroke of genius and luck at the same time that those things came together. By

• 39:18Speaker 02

  the time, fast forward to Instagram, the technology to do this obviously had sort of already existed, which was wonderful. But we had also moved as a-

• 39:31Speaker 02

  A marketplace to be so much more focused on effectiveness. Right? I mean, AdWords started that, right? You could put a dollar in and you knew what you're going to get out. But really 10, 12 years later, that had taken over the world. And so the ability to target.

• 39:43Ben Gilbert?

  Yeah, Facebook dropping, you know, conversion pixels or telling advertisers, "Hey, you should be putting these conversion pixels at the end of the pot of gold on your website." So we know when these people are actually buying the stuff. You can tell us how much it was for, we can help you tune that.

• 39:55Speaker 02

  Exactly. So it's like really serious performance marketing. And of course, that existed. That was the expectation in the marketplace. But we were coming out at Instagram with a brand new platform and we didn't know how it was going to work. And we knew.

• 40:09David Rosenthal?

  Those pretty photos.

• 40:10Speaker 02

  They had to be pretty photos and they had to be, they had to speak to our user base in a pretty unique way. And so when you're doing something like that, you don't want to make promises. We knew that we were not building a product that was going to, at least in the short term, compete with ad, with Facebook ad dollars, right? We weren't going to be that performance marketing vehicle. In fact, initially, we talked about it with marketers more as a brand play. Because there weren't calls, calls to action. It was, it was beautiful content telling a story.

• 40:37Ben Gilbert?

  Oh yeah. Could you, could you tap on the ads the first time?

• 40:40Speaker 02

  No, not, not, not then.

• 40:42David Rosenthal?

  That there weren't even links in Instagram at all?

• 40:44Speaker 02

  Nope, there were no links. There were no links. So they really had to fit into that. Again, with the picture of longer term, we wanted links. We wanted the ability to interact. We wanted the ability to purchase and drive purchase, purchases, right? Because it's this beautiful ecosystem for discovery. But again, the infrastructure didn't exist then. The, the mobile infrastructure didn't exist then. So what we did was we very systematically went through all of the pieces of Facebook that we could either lean on or build our, our own. And we decided systematically, okay, we're going to lean on Facebook for this. We're going to build our own this, right? That, I should say. So we had the Facebook data, right? We knew who our users were and that was a huge gift.

• 41:28Speaker 02

  Because when you're going out with a new ad product, to be able to say, actually, you can target exactly who you want to target was a big, was a big win. But we also, in the, in the sort of the face of. This is going to be, feel a little bit more like brand advertising early on. This was not a world, this was not about micro-targeting. This was about getting your audience in pretty broad swaths.

• 41:48Ben Gilbert?

  Targeting tends to be really important in direct response advertising and less important in brand advertising because you're going for the bigger, broader base. I guess, yeah, did you need all that targeting capability for those initial?

• 41:59Speaker 02

  We needed basic targeting because our user base was 100 million users. And you need really big budgets to target all 100 million users.

• 42:06David Rosenthal?

  Right.

• 42:07Speaker 02

  And by the way, it's not going to be relevant for them. So you have to think about them.

• 42:10Ben Gilbert?

  You could be buying a Super Bowl ad every day.

• 42:11Speaker 02

  No, and nor would that necessarily play particularly well with what we were starting to do. Again, remember, the beginning was about little disruption, platform-consistent, visual storytelling experience. And it was also our chance, it was our sandbox. It was our chance to play and, and sort of try different things. So.

• 42:31David Rosenthal?

  So did you need, maybe I'm jumping ahead here, but did you need a new ad sales team to go sell these ads and interface with these brands? I mean, that's not the core capability of what the Facebook ad sales team was doing at this time, right?

• 42:43Speaker 02

  Yeah, so we decided to do a, take a hybrid approach. We leaned on the sales teams really heavily because they had all these relationships that we didn't have to go recreate. But we actually started a little ad sales team within our group and we sort of repurposed people who were doing more business development work and the, and the such to go and have those conversations. So it, when we showed up, this was not a Facebook marketing ad sales meeting. This was an Instagram.

• 43:08Ben Gilbert?

  Interesting.

• 43:09Speaker 02

  Meeting.

• 43:10David Rosenthal?

  Cause you're probably meeting with different people within the advertisers, right? Like, do these big brands have different?

• 43:16Ben Gilbert?

  Performance versus brand.

• 43:16David Rosenthal?

  Brand versus performance people?

• 43:17Speaker 02

  Um, you know, probably in some cases, but ultimately when you're doing something this experimental, cutting edge, you're typically running up to the people at the top anyway. And we tended to work with brands that were doing this in-house and weren't out, like outsourcing it to agencies. So it was just easier for us. It was lower friction for us. We didn't have to go through 10 layers of approval. So again, we were able, we were in such a great position, we could go to the advertisers we wanted to go to.

• 43:42Ben Gilbert?

  It's like the greatest startup of all time where you both get to do things that don't scale and have a playground to do it manually, but can pick up the phone and have any CEO say, sure, we'll commit X million dollars to that.

• 43:53Speaker 02

  Exactly. Yeah. And of course, when I did this again at Snapchat, now Snap, we didn't have anyone to lean on. We had to build it all of ourselves. We have to build the technology ourselves. Now, by that point, which was, you know, 2013, 20, I guess it was 2014, 2015, we could have gone to a Google or, you know, one of the other engines and said, can you just send us your ads and here are the qualifications that they have to meet?

• 44:18David Rosenthal?

  And at Snap, you did a partnership with Viacom, right?

• 44:21Speaker 02

  That was, uh, okay. No, that's a little conflating issues, but I can explain that. But no, we actually decided, um, instead of going to a partner and just having them turn on their ad feed to us, that advertising was going to be an important part of our DNA and our business moving forward. And when it's an important part, you don't want to outsource it. You want to own it. And so we actually went ahead and built the infrastructure in-house to serve the ads, to measure the ads.

• 44:48David Rosenthal?

  This is at Snap?

• 44:49Speaker 02

  This was at Snap. Yeah. So we launched the, yeah, Snapchat, now Snap. We, we built that infrastructure in-house. Um, we went and got all the advertisers by ourselves. We did all the measurements. I mean, again, if it's important, you've got to have it in, in your purview and your control. You want to measure it. You want to know it. You want to understand it. We did down the road when we launched Discover, which is the platform, right, where we pull in third-party content in sort of bytes-sized snippet formats that you can sort of read really easily. We had ads, embedded ads within that. And so our partners who were actually producing the content to a format that they had agreed on with us, were doing a bunch of the ad sales for that content, but not for the core Snapchat content.

• 45:31David Rosenthal?

  Because a lot of that was, some of it was repurposed, but it was TV commercials, right, that were coming into that. So that was why, hence the Viacom partnership. Anyway.

• 45:40Speaker 02

  Yeah.

• 45:41David Rosenthal?

  Cool.

• 45:42Speaker 02

  Yeah.

• 45:42Ben Gilbert?

  I think that about takes us to the end of the road on, on the history and facts of, of the Instagram acquisition.

• 45:48David Rosenthal?

  You know, the end, uh, as we said in the beginning, as we always do, is, um, you know, eight to nine billion dollars. Well, a, a brief timeline. It was 2015, as we mentioned, when self-serve ads launched. 2016, Stories launched. There were no Stories on Instagram before 2016.

• 46:07Speaker 02

  But you can thank Snapchat for that.

• 46:08David Rosenthal?

  Yeah, right.

• 46:09Speaker 02

  Snapchat for that.

• 46:10David Rosenthal?

  And famously, and it wasn't until 2017 that ads in Stories launched. I mean, that was two years ago.

• 46:18Ben Gilbert?

  Well, and there's still, I mean, this is still, we've talked about this on previous episodes, but Stories is not as good of a medium for advertising as the feed is. And so Facebook and everyone else with Stories is going to have a reckoning as more and more attention shifts to Stories with their advertising performance. And I think that shows up in Facebook's numbers a little bit, and they've cited it a little bit as reasons that there might be a deceleration. But it's kind of obvious in the user experience. When you're going through Stories, you're just not grabbed in the same way that you're grabbed. It's so, if you take a step back and think about what we're talking about here, I'm saying that when you are flicking vertically through something,

• 47:00Ben Gilbert?

  ads are somehow more appealing of a format as when you are horizontally tapping through something. And yet, it is a dramatically different user experience where in a story, you're like, "Ah, not now, not now. I'm in the now, I'm in the story." But when you're scrolling, you're used to studying something for longer and it being something that you're willing to let interrupt your brain for a little bit.

• 47:20Speaker 02

  Exactly. So it's really about trying to infuse ads in a story versus in a feed. That's the real difference. We actually at Snapchat, when we launched the live Stories, we took a pretty different approach with advertising too, because of that, actually. And we decided to make it much more of a brand play. Because brands were typically, they were already part of that social experience. Like if you're going to go to a concert or something, or you're going to go to an event, there's usually brands around you anyway that are associated with that. And so our first step was let's pull them in and make them part of this online experience too, not just the in-stadium experience or the in-concert venue experience.

• 48:04Ben Gilbert?

  Right.

• 48:04David Rosenthal?

  So predicted Instagram to do 14 billion in revenue this year in 2019, when I believe it was shortly before we did our first episode, episode two on Instagram, Citigroup had just done a research report on Facebook and estimated the value of Instagram within Facebook at 35 billion at that point in time, which was a crazy number, right? I mean, we'll get to grading in a minute here, but you know, by any measure, a business that big, growing at 40, 50% a year with a very high margin, you know, ad revenue business, probably going to get at least a 10x revenue multiple, which is very high, but like warranted. You look at like Square's trading at a 10x revenue multiple with worse margins.

• 48:46Ben Gilbert?

  So you're saying the enterprise value of Facebook, I'm sorry, of Instagram is somewhere around $150 billion?

• 48:50David Rosenthal?

  That's what I'm saying, at least, right? You know, and Facebook's market cap is, I believe, about $400 billion today. Didn't look right exactly.

• 48:58Ben Gilbert?

  Which is interestingly, right about 2x from the last time we dove into this story at the end of 2015.

• 49:03David Rosenthal?

  So there you have it. For the moment, we're going to pause our history and facts on Instagram. Something tells me we'll revisit this again in the future.

• 49:13Ben Gilbert?

  I'm pulling forward a tech theme here, but it is interesting to take a step back and just let it dawn on you that, you know, Friendster and MySpace never, I mean, imagine if MySpace had bought Facebook and they said, okay, look, it's, it's, it's not about MySpace, the platform succeeding, it's MySpace, the company succeeding. And Facebook did that when they bought Instagram. And so Facebook is becoming less relevant. Instagram became way more relevant. It was the thing the kids were on. Everyone's parents got on Facebook. Snap started to steal some of that back. And then Instagram, you know, Facebook, Instagram, sort of wisely realized, we're going to leverage what we still have, and that's the network. And we're just going to copy feature for feature in a way that blends really well into our

• 49:55Ben Gilbert?

  product. And they managed to sort of like steal a lot of that back. And, and Instagram remained sort of, or avoided that sort of low end disruption. And the thing that I'm wondering now is sort of like, have the parents come to Instagram? And has Instagram become uncool? And is there something else that Facebook's going to need to go by here shortly? When the existing social networks are sort of

• 50:19David Rosenthal?

  Ben, we are the parents now.

• 50:22Speaker 02

  Yeah, as the parent in the room, the parents are on Instagram.

• 50:28Speaker 02

  First of all, I think we're seeing that the, there's longevity to these things. I mean, Facebook has been around in and of itself for a while, right? And it still is, even though it doesn't always feel like it's as much of our day to day as it used to be, it's still incredibly successful. Instagram has managed so far to stay really true to its initial character, I think.

• 50:49Ben Gilbert?

  Yeah.

• 50:49Speaker 02

  Um, while adding on some really nice bells and whistles that keeps it current and has really helped, as you mentioned, to capture sort of some of the wandering eyes off. So I don't know, I, I would still, I would bet money on Instagram continuing to do well. Although we'll see what happens when, you know, as Facebook is thinking about bringing all these products together, you know, that's a very delicate situation that they can't really afford to mess up, so.

• 51:12Ben Gilbert?

  Yep. Yeah, and it's, it actually, we shouldn't call the history in fact done without mentioning that, uh, the founders are no longer at Facebook, um, and, and left in, uh,

• 51:23Speaker 02

  Just last year.

• 51:24Ben Gilbert?

  End of 2018.

• 51:25Speaker 02

  Yeah.

• 51:26Ben Gilbert?

  And in sort of disagreements about the, the future direction of the product. So, um, I'm, I'm not saying like- It's also been a long time. Yeah, yeah, yeah. I come down way in the camp, can I just say, it was ridiculous reading those news articles that were all like, "The founders are leaving, this is, this is crazy and it signals all these bad..." It's like, I can't believe how long they were there. I mean, it really speaks to like-

• 51:46Speaker 02

  I know, right?

• 51:47Ben Gilbert?

  It speaks to how right the acquisition actually went, that they stayed this long. It never happens. Yeah.

• 51:52Speaker 02

  Yeah, no, you're right. And I think that these things become institutionalized too. I mean, I, I, I think that people and culture are everything to a business. And by the time that, you know, um, Kevin and Mike left, like, they had built an organization of people that they had handpicked and they had decided what the culture was going to be and that existed within Facebook. Now, can they keep it going? We'll see, but it's, you know, it's so much larger than just the two of them now.

• 52:18Ben Gilbert?

  Yeah. That's a great point.

• 52:20David Rosenthal?

  Well, actually, this is a really good segue to revisiting acquisition category here. I believe I called this a technology acquisition in episode two. I think we were trying to disagree more and

• 52:32Ben Gilbert?

  Yeah, so Emily, we should, we should talk here about like, and for folks who are new to the show, every time we we bucket into a category of people, technology, product, business line, asset, or other, and we've come up with like several different others over the years. But basically, the the main distinction to draw there is between technology, product, and business line. A business line is when you're buying something that's revenue generating and you're going to sort of leave it alone and it's gonna, it's gonna increase in value and you're gonna

• 52:59David Rosenthal?

  YouTube or

• 53:00Ben Gilbert?

  Yeah, yeah. Yeah, a product is something that I would argue like Instagram, for example, where it was not its own business line, but you were buying something that was sort of a fully baked thing that people were going to use that was its own full value chain, not relying on

• 53:13David Rosenthal?

  Technology is like you're buying an ML service.

• 53:15Ben Gilbert?

  Yeah.

• 53:15Speaker 02

  This is definitely product.

• 53:17David Rosenthal?

  Yeah.

• 53:18Speaker 02

  It's definitely product.

• 53:21David Rosenthal?

  It was the early days. Yes, for sure. A product acquisition.

• 53:23Ben Gilbert?

  Yeah, yeah, we should. And yeah, that was probably because we were trying to disagree more at that point in the show, but I don't think there's many, there's no arguments about that. So what would have happened otherwise? A lot of times we talk about like, what would have happened if this didn't get bought? And we waxed philosophically about that before. Anybody who wants to should go listen to episode two. The thing I'm curious about, and I want to pick Emily's brain on is what if Twitter had successfully bought Instagram? What do you think the most likely outcome is of of that if that had happened?

• 53:52Speaker 02

  Oh, my gosh, that's a really hard one. I will tell you that with, you know, sort of knowing that the Twitter history, when Kevin and I went to present to the board, I don't know, maybe four or six months after I had joined, I said to the board, we just bought the next Twitter. It's gonna be bigger than Twitter because it was so much smaller at the time, but I was trying to get across the point, which I wasn't sure they knew. That this was a really big deal and it had tremendous amount of traction.

• 54:19David Rosenthal?

  The board was skeptical that you were overselling.

• 54:22Speaker 02

  Maybe.

• 54:22David Rosenthal?

  Reality, you are underselling.

• 54:24Speaker 02

  Maybe. I think that, listen, I think had, we'll start with like, had Facebook not acquired Instagram, I don't know where Facebook would be today, honestly. I think that Mark showed a level of ingenuity in identifying and moving quickly on the Instagram acquisition, and maybe he would have done it on the next one. I don't know, and been successful with that. I'm pretty sure that Instagram would have been very successful. It just would have taken longer, right? I mean, we leveraged a lot of what was at Facebook to make it grow this quickly, right? The expertise, the technology, the people that go to market, it was all built in, which was wonderful. We intentionally maintained the product experience, and that has continued to do very, very well despite, you know, and

• 55:04Speaker 02

  in addition to it being part of Facebook. Had Twitter bought it, I don't know. The management challenges there have gone on for a really long time, and, you know, you'd like to think that Instagram would have been able to carve out their own niche within Twitter and been able to avoid getting caught up in sort of the drama there, but who knows?

• 55:23David Rosenthal?

  But yeah, because that was, this was, um, Preject Orsi coming back.

• 55:27Speaker 02

  Yes, yeah.

• 55:28David Rosenthal?

  And, uh, there was.

• 55:30Speaker 02

  Yeah, Dick was still there.

• 55:31David Rosenthal?

  That, that moment in time was, uh, would have been a, a hard entry point, I think, for any business into, uh, into, into Twitter as a company.

• 55:39Ben Gilbert?

  Let's say for, for Dick Costolo, prescient to try and close him for 500 million.

• 55:44David Rosenthal?

  Yeah.

• 55:44Ben Gilbert?

  I mean, that's, that could have been a nice, a nice pickup.

• 55:47David Rosenthal?

  Yeah.

• 55:48Speaker 02

  Yeah, but this, we're living in a world, I mean, at that point with 13 or 16 employees, no revenue, user traction, it's all sort of funny.

• 55:56David Rosenthal?

  Yeah.

• 55:56Speaker 02

  It doesn't even matter, honestly. I mean, at that level, if you, if you save or have to spend an extra 500 million, and it would sound so bizarre, but the, the possibility is so tremendous that it really doesn't matter.

• 56:07David Rosenthal?

  Yeah. It's funny, this is reminding me of, um, this will be for another episode someday, but, uh, I remember when I was at GSP in, in business school. Bizstone came to one of my classes and told the story of when Mark Zuckerberg tried to buy them for 500 million. And I'm probably butchering the story, but the legend has it that it was Biz and Ev and they met with Mark. Then they got back in the car and they were driving back up to San Francisco deciding whether to take it. And Ev said something like, well, if we're worth, you know, 500 million, we're worth 5 billion or so. I think it was if we're worth a billion, we're worth 10 billion or something like that. And like, it sounds so silly, but you're right. Like when you're talking about things at this scale and these opportunities, like Instagram, 500 million, a billion, 10 billion.

• 56:48Speaker 02

  Whatever.

• 56:49David Rosenthal?

  It's a steal at any price.

• 56:50Ben Gilbert?

  It is crazy. Yeah, that Twitter offered 500 million for Instagram and then Facebook bought WhatsApp for 40 times that.

• 57:00Speaker 02

  Yeah. Well, that goes to the point of like, I think there's just maturing viewpoints on what these things are worth. But you have to remember that Ev had sold his last company, Blogger, to Google.

• 57:09David Rosenthal?

  Yep.

• 57:09Speaker 02

  So he had been down this road. He knew what integrations look like.

• 57:13David Rosenthal?

  Yep.

• 57:14Speaker 02

  He knew he'd made money at that point. And founders' mindsets change when they have something in their pocket.

• 57:18David Rosenthal?

  Yeah. That's another thing that's changed since those days. I mean, it used to be, I feel like Instagram also ushered in the age of secondaries being okay for founders, right? Because if you haven't made any money and you have a billion dollar deal on the table.

• 57:35Ben Gilbert?

  Right.

• 57:35David Rosenthal?

  That's really hard to say no to. But if you're able to take some money off the table along the way and like buy a house, you know, it's easier to keep going and build the 150 billion.

• 57:44Ben Gilbert?

  San Francisco where you need a billion dollar acquisition to buy a house.

• 57:47David Rosenthal?

  Basically.

• 57:48Speaker 02

  Crazy.

• 57:49Ben 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.

• 58:02David 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?

• 58:19Ben 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.

• 58:34David 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. Legora'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.

• 58:58Ben Gilbert?

  And they recently launched Legora 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.

• 59:17David Rosenthal?

  And Legora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Legora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Legora 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.

• 59:47Ben 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 legora.com/acquired and just tell them that Ben and David sent you. One other question in here for Emily. Knowing Facebook as intimately as you did at that point, do you think, without buying Instagram, that Facebook would have been able to succeed on mobile for the Blue app, for their own product? And how crazy was the ship already turning into native, native, native, mobile is super

• 1:00:31Ben Gilbert?

  important by the time the Instagram acquisition happened?

• 1:00:34Speaker 02

  At that point, they had realized it.

• 1:00:36David Rosenthal?

  Okay.

• 1:00:36Speaker 02

  Do you remember when Facebook came out with the Facebook phone?

• 1:00:38David Rosenthal?

  Oh, yes.

• 1:00:39Speaker 02

  Yes. I mean, there was a lot of effort. There were a lot of efforts underway at that company, you know, at that point, to make sure that it was a mobile-first company. And I would say it took about a year, year and a half to really make that DNA change. But by the time Instagram was brought in, it was humming. It was fun, I have to say, for me personally, because I had only worked on, at companies that had made that transition, right? I'd never worked at a sort of mobile native. I mean, we would remember, like, sort of getting in these conversations about, like, how do we continue to invest in Instagram web version? And like, why did it exist? And how much functionality do we want to put in there? And when did people use it? And do we even need it? So the world has changed a lot.

• 1:01:23David Rosenthal?

  Yeah. Although I will say, Jenny, my wife, uses Instagram web quite a bit. And we have web listeners of acquired.

• 1:01:31Ben Gilbert?

  I heard they're adding DMs to Instagram web. Big flash news. You know, this is 2019, and this is what we're excited about.

• 1:01:39Speaker 02

  Yeah. But the, but the main use case was really the ability to reference it and press, right? They needed the ability to pull web images and web embedded, right? So that was sort of the, one of the initial key drivers. But yeah, I mean, we, it was really a second-class citizen for a very, it sounds like it still is. Yeah.

• 1:01:57Ben Gilbert?

  Yeah.

• 1:01:59David Rosenthal?

  Well, tech themes, I feel like, per usual, we've covered a lot of them. One I want to throw out there that I think I hadn't thought about before this, and, you know, talking to you, Emily, it seems to me, and feel free to disagree, but it seems to me like, even though Instagram had certainly lots of advantages within Facebook, and as you say, you know, got to where it would have gotten anyway, but faster. It's kind of amazing how much it still was a startup journey, right? Like, you were having to do, you know, Instagram walks to evangelize Instagram within Facebook. Like, it's still a fight for resources. It's not like an acquisition happens in a business on this scale and like, everything's done. The hard work's over. You know, it's still like building the company.

• 1:02:38Speaker 02

  It felt so much like a startup. And at the same time, we were part of a public company, which then emphasized, at least to me, that we needed to double down on who we were and really make sure that we knew it and that we were defining it for the community. Because otherwise, it's just way too easy to get bowled over by like, the massive organization that you're a part of, right? And so, you know, our ability, we still had to recruit entrepreneurial people and engineers, right? We didn't want people who were sort of nine to five. We wanted like passionate people who loved this business. And we needed to, we needed to make sure that people understood that we were different in our own way while still being part of it.

• 1:03:22David Rosenthal?

  Did you guys, or maybe even you specifically, given your history, did you look at YouTube within Google as like an example of this? I mean, separate campuses, separate cultures, separate everything, obviously shared on a lot of fronts, but really enabled those businesses to grow separately.

• 1:03:35Speaker 02

  Yeah, I think Google did a really nice job with the YouTube acquisition in that they resourced it, they informed it, but they let it fly on its own for a very long time. And, and you don't know if you remember, but like before Google pot YouTube, they had launched Google TV and it had not worked. It had not worked. And so they kind of knew that they didn't know what they were doing, but that YouTube had figured it out. And so that was a very smart move. And I think they've done a nice job with many of the other nest is another one, right? Where they're just sort of keeping it separate. In the case of Facebook and Instagram, there's so much underlying overlap, right? I mean, the, the sort of back end infrastructure. I mean, even you think about like the content policing,

• 1:04:16Speaker 02

  like that takes teams and teams of people all over the world. And so it was

• 1:04:22Ben Gilbert?

  They actively employ like tens of thousands of people today.

• 1:04:25Speaker 02

  Yes, absolutely. No, it's, it's amazing how much manual work still goes into, into that. And so being, being able to sort of plug into that and quickly, again, because the team was so small and so immature, but we had this user base that was large, the size of a much more mature company and we had to deliver to those standards. So it was incredibly, it was amazing resource for us to be within Facebook where we had all of those people and had those systems. Where we did decide though, we decided like, we're going to have our own policies of what we're going to allow and what we're not going to allow. And that this is more of an artistic platform and one of expression in a way that Facebook isn't. So what does that mean for the review process that we have? So again, we went systematically one by one and decided where, where we were going to integrate and

• 1:05:09Speaker 02

  where we were going to have our own sort of perspective.

• 1:05:12Ben Gilbert?

  Right. Wow. Fascinating.

• 1:05:15Ben Gilbert?

  It's funny, the one I've been thinking about is you were talking about at the time of acquisition, or just thereafter, you and the Instagram team were kicking around ideas about Instagram as a transaction platform. And wouldn't it be great if in this really seamless experience, you could buy stuff right from this beautiful browsable photography? And that was five, six years ago now, and we're just starting to hear whispers now that that's starting to get productized. And it just reminds me so much of when you have a startup idea, or you're hearing someone's startup idea, and they're talking about this thing that they think they eventually will be able to do. And it actually doesn't sound

• 1:05:58Ben Gilbert?

  that hard. A lot of times, these things are like, well, why don't you just do that feature? But there's just this morass of stuff that underlies it, that has to be built foundationally before that's even possible. It's just a testament to the near-term work and that thing that you want to achieve eventually fitting under the same mission and vision, so that you can put the mission and vision on the wall, use that as a knife for decision-making. Does it fit in that, or does it not? And without having to build that thing today, still be able to march toward the goal of building that thing eventually. And these things, whether you have billions of dollars at your disposal within a big company, or you're a scrappy startup, just takes a ton of time to be able to realize these.

• 1:06:40Speaker 02

  And you have to remember, this is all happening at a time where it was like, do we even need to monetize? And we decided we needed to monetize, but we also needed to grow the product, right? So we hadn't launched video, right? I mean, we hadn't launched direct messaging, we hadn't launched stories. And so, of course, the demise of many a business comes when there's lack of focus, and you want to do everything. And one of the nice things about being small is that it really forces you to prioritize. And even though we were within a larger company, we still felt like a startup, we still felt like a small team, and we knew we could not do everything at once. And so, you start to think about horizons. And when does it make sense to do something? When does it make sense from a technological perspective? When is our community going to be ready for

• 1:07:24Speaker 02

  it? How do you balance monetization, non-monetization together to create a story so you're continuing to drive user value? They all go into the recipe and decision-making process.

• 1:07:38David Rosenthal?

  I have one more theme that I didn't think of till just now too, per usual. But you know, saying this, it strikes me too, that there also was like a really perhaps equally viable history where Facebook acquires Instagram and you and Kevin and Mike decide monetization is not that important, right? And then the world looks very different today, right? Like, so it just reminds me that like, at the end of the day, this is really all about the people, right? Like, I assume if, if the three of you had been like, okay, like, the company probably would have been okay with that, right? Like, it came down to you guys saying like, no, we are going to monetize, we are going to build a business here, right?

• 1:08:16Speaker 02

  Oh, my gosh. I mean, the, the history is littered with these small decisions that seem so small at the moment. I mean, just as a, as a parallel example, when I first joined the Facebook mobile team, I went and looked at all the contracts we had with carriers. Now, we were not monetizing mobile at all, but in the contracts we had written in that they would get like roughly, I think on average, like 5% of the mobile revenue.

• 1:08:37Ben Gilbert?

  What?

• 1:08:38Speaker 02

  I am not kidding.

• 1:08:40David Rosenthal?

  Wow.

• 1:08:40Speaker 02

  And I read these, I was like, okay, so we need to change this to zero before we launch ads, let's go do it. And we did, but you know, such a minor thing that you could have sort of, you could very well have justified it. By the way, it wasn't easy. These, these, the mobile operators were not happy that we did this, but we also knew we had, I mean, it was really like, we could choose to give some of it back, but we didn't want to be contractually obligated to be in a rev share with anyone because we hadn't done it before. There was no real need to do it. And so.

• 1:09:11Ben Gilbert?

  It does go to show too, like the, whoever negotiated those originally was probably thinking like, you know, we really need to have Facebook on mobile. No, it's never going to be a huge revenue driver for us. Don't care, I'll put it in.

• 1:09:21Speaker 02

  Exactly. I know, right? Hindsight's 2020.

• 1:09:25Ben Gilbert?

  Yep. And on Watt phones, they were right.

• 1:09:27Speaker 02

  They were right.

• 1:09:29David Rosenthal?

  Wow. Oh, wow. All right. Well, grading, this is gonna be short. Still an A plus.

• 1:09:33Ben Gilbert?

  Still an A plus. Somehow, there's not an A++ so we're just gonna, just gonna keep it there. Emily, do you have any different opinion?

• 1:09:43Speaker 02

  No. Home run, home run in every regard.

• 1:09:47David Rosenthal?

  This is like a, this is like a game, like a season ending home run. Like you hit this one and anyway. Carve outs?

• 1:09:55Ben Gilbert?

  Yeah. So it's funny, we were talking about podcasting before, before the show and we're talking about, about Joe Rogan, who I believe has the most popular podcast. And yet I had never really, other than the Elon Musk blunt smoking episode, had never really tuned in and.

• 1:10:15David Rosenthal?

  It's a really good episode, by the way.

• 1:10:16Ben Gilbert?

  It's actually, it's a phenomenal episode and it's a great interview with the guy. I need to listen to the Jack Dorsey interview as well. The episode I just listened to is Sam Harris guesting on Joe Rogan and, you know, Sam, super thoughtful, moral philosopher, I think, but also he's and, and, and, and he's, he's, he's lots of things. YouTube personality, thoughtful person of the internet and author. And their dialogue on, they both, on their shows, interviewed Jack Dorsey. They both are sort of kicking around direct monetization and flipping the business model like we talked about in the last episode of podcasting. They're both super thoughtful, but serve very different audiences. And it's just fascinating. And I think they're, they're great friends.

• 1:10:56Ben Gilbert?

  And it's fascinating to hear them relate to each other, where they're these sort of mega influencers in wildly different worlds. And I think it's a, it's a fascinating listen for, for anyone who's a fan of podcasts, a fan of, of trying to understand the world of media a little bit, but then also in a new media in an influencer sense, but then also trying to understand, you know, they do like 20 minutes on what it's like to prepare for and interview Jack Dorsey. And that's sort of a fascinating sort of dive into their, their different psyches. So I highly recommend that episode.

• 1:11:26Speaker 02

  Oh, I've got to add to my list. That's awesome.

• 1:11:29David Rosenthal?

  Podcast, the new Instagram. My Carve Out is a really, really fun book, which I'm not quite done reading yet, but can't wait to finish Boomtown by Sam Anderson, history of Oklahoma, of Oklahoma City specifically. Man, I did not know anything about the history of Oklahoma City. So he, he was journalist, was assigned to write about the Thunder and the basketball team and stealing the Thunder from Seattle, but realized that there's a much bigger story about the history of Oklahoma City, which sounds like, why would you write a book about that? But it's crazy. It is very worth, I can't even describe it other than like, I cannot believe that even in the late 1800s, like basically what happened was, you know, you read about this in elementary

• 1:12:14David Rosenthal?

  school in history, like the US government, Oklahoma was a unassigned territory, former native lands, and they decided that one day at noon on April 22nd, I think like 1889, they were just going, anybody who wanted land could come in and claim 160 acres of land. That's it. There was no, so like at noon on that day was, you know, the boom and Oklahoma happened overnight and Oklahoma City happened overnight. Like people like lined up outside the courthouse. People cheated, they were the Sooners, that's why they're the Sooners. They cheated and came across the border earlier and like, who's gonna tell them no? It was chaos. And in many ways, Oklahoma and Oklahoma City have been the same ever since. So really, really

• 1:12:57David Rosenthal?

  fun. Kind of hard to believe this happened in America, but.

• 1:13:00Ben Gilbert?

  It's like domain names, but in real life.

• 1:13:03David Rosenthal?

  Yeah.

• 1:13:04Ben Gilbert?

  Awesome. Well, listeners, that is, that is all we've got today. Emily, where can our listeners find you on the internet? If, if that is something that, that you'd be interested in, in sharing?

• 1:13:19Speaker 02

  Oh, so ironically, I'm not sure I can really be found. I feel like my life in the, my life in social media is so much on like the operations and making it happen and so less on the sharing side. I don't tweet, I read. I look at Instagram, I actually don't even post that much and same with Facebook. So I'm much more of a consumer, but that has to do with so much of my like preference for being sort of a quiet, private person.

• 1:13:47Ben Gilbert?

  Yeah. All right. Well, awesome. Well.

• 1:13:50Speaker 02

  Look for me at the halls of the airport.

• 1:13:55David Rosenthal?

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

• 1:14:01Ben 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.

• 1:14:12David 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.

• 1:14:32Ben 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.

• 1:14:44David 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.

• 1:14:55Ben Gilbert?

  Well, listeners, if you do want to hear a little bit of a deeper dive into some of the things that Emily thinks about today with investing at Anthos and a lot of the other things that she had talked about throughout her career at Google, then tune in and we will be continuing the discussion in the limited partner show. So you can click the link in the show notes to go to kimberlite.fm/acquired. Or if you are already a member, just hit the back button in your podcast client and go to the LP show feed. So we will see you next time.

• 1:15:28David Rosenthal?

  See you next time.