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Where top VCs are investing in media, entertainment & gaming
Most of the strategy discussions and news coverage in the media and entertainment industry is concerned with the unfolding corporate mega-mergers and the political implications of social media platforms.
These are important conversations, but they’re largely a story of twentieth-century media (and broader society) finally responding to the dominance Web 2.0 companies have achieved.
To entrepreneurs and VCs, the more pressing focus is on what the next generation of companies to transform entertainment will look like. Like other sectors, the underlying force is advances in artificial intelligence and computing power.
In this context, that results in a merging of gaming and linear storytelling into new interactive media. To highlight the opportunities here, I asked nine top VCs to share where they are putting their money.
Here are the media investment theses of: Cyan Banister (Founders Fund), Alex Taussig (Lightspeed), Matt Hartman (betaworks), Stephanie Zhan (Sequoia), Jordan Fudge (Sinai), Christian Dorffer (Sweet Capital), Charles Hudson (Precursor), MG Siegler (GV), and Eric Hippeau (Lerer Hippeau).
Cyan Banister, Partner at Founders Fund
“In 2018 I was obsessed with the idea of how you can bring AI and entertainment together. Having made early investments in Brud, A.I. Foundation, Artie and Fable, it became clear that the missing piece behind most AR experiences was a lack of memory.
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Instagram officially tests hiding Like counts
Would we feel less envious, shameful and competitive if Instagram didn’t tell us how many Likes a post received? That’s the idea behind Instagram now hiding Like counts from both a post’s viewers as part of an experiment in Canada. A post’s creator can still open the Likers window to see the names of everyone who hearted their post. Instagram has also recently redesigned the profile to make follower count much less prominent, the app’s head Adam Mosseri says.
Even though Like totals would still impact how the algorithm ranks a post in the feed, if rolled out, the change would refocus Instagram on self-expression instead of being a popularity contest. Users might be less likely to delete a photo or video because it didn’t get enough Likes, or resort to their Finsta account to post something authentic but less “perfect.” It could make us less likely to envy-spiral because we wouldn’t see friends or influencers getting more Likes than us. And people might be more willing to post what truly represents their complicated identities because they’re not battling for the biggest Like count.
“Later this week, we’re running a test in Canada that removes the total number of likes on photos and video views in Feed, Permalink pages and Profile,” an Instagram spokesperson tells TechCrunch. “We are testing this because we want your followers to focus on the photos and videos you share, not how many likes they get.” The small percentage of Canadian users in the test will see a notice atop their feed warning them of “a change to how you see Likes.” The announcement came alongside a slew of new product debuts at Facebook’s F8 conference.
One big concern, though, is that influencers often get discovered for paid promotions or have their sponsored content measured by public Like counts or a screenshot of their Liker list. “We understand that this is important for many creators, and while this test is in exploratory stages, we are thinking through ways for them to communicate value to their brand partners,” an Instagram spokesperson tells TechCrunch.
TechCrunch first reported two weeks ago that Instagram had prototyped hiding public Like counts, as spotted by Jane Manchun Wong. The company confirmed the feature had been built but not tested in the wild. The news immediately set off a wave of commentary from users. Many, while initially shocked, thought it would make Instagram usage healthier and cutback on some of the toxic anxiety produced by staring at the little numbers.
So why test in Canada? “Canadians are highly social and tech savvy, with over 24 million people connecting across our family of apps each month. We wanted to test this with a digitally savvy audience that has a thriving community on Instagram,” a company spokesperson told us.
Leading The Fight Against Bullying
On stage at F8, Mosseri announced that Instagram doesn’t just want to stop bullying, but lead the Internet’s battle against it. To that end, he announced several new tests of features Instagram hopes will make the app less toxic and hateful.
- A new “nudge” feature will warn users if they’re about to comment something hurtful. The test stops short of censorship while still addressing bullying before it happens.
- “Away Mode” will encourage users to take a break from Instagram at intense times in their life, like moving to a new school. They don’t have to delete their account, but can still get a break from constant notifications and concerns about how they look.
- “Manage Interactions” will allow users to set limits on how certain people interact with them without having to block them completely. Maybe you don’t want someone to be able to comment on your posts, but still Like them. Or you’re cool with them seeing your photos but don’t want to get DMs from them.
If these features succeed at promoting digital well-being, Instagram will likely roll them out to everyone.
It’s reassuring to see Instagram adding new well-being features after the departure of founders Kevin Systrom and Mike Krieger. Systrom in particular had been a big proponent of reducing envy and inauthenticity on social media, which was part of the impetus for launching Instagram Stories, where users could share unpolished looks at their lives. Before he left in September, Instagram rolled out its Your Activity dashboard showing the average time you spent per day on the app, plus a “You’re All Caught Up” warning that tells users they’ve seen all recent feed posts and can stop scrolling.
A 2013 study by Krasnova et al. discovered that 20 percent of envy-causing situations that experiment participants experienced happened on Facebook. They also determined that Facebook causes toxic envy, noting that “intensity of passive following is likely to reduce users’ life satisfaction in the long-run, as it triggers upward social comparison and invidious emotions.” Instagram, with its focus on imagery and manicured looks at our lives, might cause even more envy. Hiding Likes would be a strong step toward us judging ourselves less.
Click below to check out all of TechCrunch’s Facebook conference coverage from today:
Correction: Instagram originally told us a post’s creator couldn’t see its Like count either, but now tells us the count will only be hidden from viewers.
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Mejuri raises $23M Series B to serve women buying jewelry for themselves
New Enterprise Associates, the 42-year-old venture capital firm, has invested in the $23 million Series B round for Mejuri, a startup capturing millennial women’s penchant for affordable and treat yo’ self type of jewelry rather than diamonds and precious stones for special occasions.
It’s the latest instance of startups drawing investor interest with their direct-to-customer retail model. Based in Toronto and Buenos Aires, four-year-old Mejuri designs, makes and sells jewelry directly to women online and through offline showrooms, bypassing middle-person costs. Besides striving for reasonable prices, Mejuri also wants to upend an entrenched practice in its industry.
Traditional jewelry, the startup points out, targets men for gifting and makes higher markups acceptable. With its D2C play, Mejuri believes it’s putting the purchasing decision back with women; indeed, it found 75 percent of its customers are buying for themselves. Its team of 120 employees is constantly on the watch for trends and consumer feedback, a strategy made possible by its online presence of more than 422,000 Instagram followers. Instead of releasing large batches of seasonal pieces, Mejuri adapts the so-called “drop” model that introduces only a small quantity of products each week, which allows it to timely translate customer sentiments into designs.
Photo source: Mejuri
Another enabling factor is the company’s female-led team: 80 percent of the staff are women, headed by founder Noura Sakkijha, a third-generation jeweler and a former industrial engineer who scored the company’s latest capital when she was seven months pregnant with two twins.
“Mejuri’s mission really hits home for me,” said NEA partner Vanessa Larco in a statement. “I noticed a shift in trends when none of my friends wanted to go to any of the traditional fine jewelry companies to purchase jewelry anymore, and I realized a lot of those big brands were in trouble.”
Natalie Massenet, founder of Net-a-Porter and partner at Imaginary, another venture fund that participated in Mejuri’s Series B, said the startup is set to “disrupt” the jewelry industry through supply chain standards that modern consumers demand, “like sourcing from conflict-free and socially responsible diamond suppliers and maintaining affordable prices to serve a consumer who is buying for herself and her friends.”
The user-centric focus has brought customer loyalty to Mejuri. The startup claims that 30 percent of its monthly transactions come from returning shoppers, and 70,000 customers are on the waitlist for its products. It’s accumulated a total of 20 million visitors to its website and released 1,500 designs since launch. Revenues have quadrupled year-over-year for the fourth consecutive year, and the company, one of TechCrunch’s favorite picks from 500 Startups’ Batch 15 Demo Day three years ago, said it’s on track to achieve the same level of traction in 2019.
The new proceeds bring Mejuri’s total funds raised to more than $29 million to date. Others in the new funding round include follow-on backers Felix Capital, BDC Capital, Incite Ventures and Dash Ventures. The company plans to spend its latest financial injection on offline expansion, overseas growth and investment in branding and customer experience.
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You might hate it, but Facebook Stories now has 500M users
You might think it’s redundant with Instagram Stories, or just don’t want to see high school friends’ boring lives, but ephemeral Snapchat-style Stories now have 500 million daily users across Facebook and Messenger. WhatsApp’s Stories feature Status has 500 million dailies too, and Instagram hit that milestone three months ago. That’s impressive, because it means one-third of Facebook’s 1.56 billion daily users are posting or watching Stories each day, up from zero when Facebook launched the feature two years ago.
For reference, Stories inventor Snapchat has just 190 million total daily users.
Facebook Stories
CEO Mark Zuckerberg announced the new stats on today’s Facebook Q1 2019 earnings call, which showed it’s user growth rate had increased but it had to save $3 billion for a potential FTC fine over privacy practices.
Facebook isn’t just using Stories to keep people engaged, but to squeeze more cash out of them. Today COO Sheryl Sandberg announced that 3 million advertisers have now bought Stories ads across Facebook’s family of apps. I’d expect Facebook to launch a Stories Ad Network soon so other apps can show Facebook’s vertical video ads and get a cut of the revenue.
Facebook’s aggressive move to clone Snapchat Stories not just in Instagram but everywhere might have pissed users off at first, but many of them have come around. If you give people a place to put their face at the top of their friends’ phones, they’ll fill it. And if someone dangles a window into the lives of people you know and people you wish you did, you’ll open that window regularly.
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Instagram hides Like counts in leaked design prototype
“We want your followers to focus on what you share, not how many likes your posts get. During this test, only the person who share a post will see the total number of likes it gets.” That’s how Instagram describes a seemingly small design change test with massive potential impact on users’ well-being.
Hiding Like counts could reduce herd mentality, where people just Like what’s already got tons of Likes. It could reduce the sense of competition on Instagram, since users won’t compare their own counts with those of more popular friends or superstar creators. And it could encourage creators to post what feels most authentic rather than trying to rack of Likes for everyone to see.
The design change test was spotted by Jane Manchun Wong, the prolific reverse engineering expert and frequent TechCrunch tipster whose spotted tons of Instagram features before they’re officially confirmed or launched. Wong discovered the design change test in Instagram’s Android code and was able to generate the screenshots above.
You can see on the left that the Instagram feed post lacks a Like count, but still shows a few faces and a name of other people who’ve Liked it. Users are alerted that only they’ll see their post’s Like counts, and anyone else won’t. Many users delete posts that don’t immediately get ‘enough’ Likes or post to their fake ‘Finstagram’ accounts if they don’t think they’ll be proud of the hearts they collect. Hiding Like counts might get users posting more since they’ll be less self-conscious.
An Instagram confirmed to TechCrunch that this design is an internal prototype that’s not visible to the public yet. A spokesperson told us: “We’re not testing this at the moment, but exploring ways to reduce pressure on Instagram is something we’re always thinking about.” Other features we’ve reported on in the same phase, such as video calling, soundtracks for Stories, and the app’s time well spent dashboard all went on to receive official launches.
Instagram’s prototypes (from left): feed post reactions, Stories lyrics, and Direct stickers
Meanwhile, Wong has also recently spotted several other Instagram prototypes lurking in its Android code. Those include chat thread stickers for Direct messages, augmented reality filters for Direct Video calls, simultaneous co-watching of recommended videos through Direct, karaoke-style lyrics that appear synced to soundtracks in Stories, emoji reactions to feed posts, and a shopping bag for commerce.
It appears that there’s no plan to hide follower counts on user profiles, which are the true measure of popularity but also serve a purpose of distinguishing great content creators and assessing their worth to marketers. Hiding Likes could just put more of a spotlight on follower and comment counts. And even if users don’t see Like counts, they still massively impact the feed’s ranking algorithm, so creators will still have to battle for them to be seen.
Close-up of Instagram’s design for feed posts without Like counters
The change matches a growing belief that Like counts can be counter-productive or even harmful to users’ psyches. Instagram co-founder Kevin Systrom told me back in 2016 that getting away from the pressure of Like counts was one impetus for Instagram launching Stories. Last month, Twitter began testing a design which hides retweet counts behind an extra tap to similarly discourage inauthentic competition and herd mentality. And Snapchat has never shown Like counts or even follower counts, which has made it feel less stressful but also less useful for influencers.
Narcissism, envy spiraling, and low self-image can all stem from staring at Like counts. They’re a constant reminder of the status hierarchies that have emerged from social networks. For many users, at some point it stopped being fun and started to feel more like working in the heart mines. If Instagram rolls the feature out, it could put the emphasis back on sharing art and self-expression, not trying to win some popularity contest.
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How-to video maker Jumprope launches to leapfrog YouTube
Sick of pausing and rewinding YouTube tutorials to replay that tricky part? Jumprope is a new instructional social network offering a powerful how-to video slideshow creation tool. Jumprope helps people make step-by-step guides to cooking, beauty, crafts, parenting and more using voice-overed looping GIFs for each phase. And creators can export their whole lesson for sharing on Instagram, YouTube or wherever.
Jumprope officially launches its iOS app today with plenty of how-tos for making chocolate chip bars, Easter eggs, flower boxes or fierce eyebrows. “By switching from free-form linear video to something much more structured, we can make it much easier for people to share their knowledge and hacks,” says Jumprope co-founder and CEO Jake Poses.
The rise of Snapchat Stories and Pinterest have made people comfortable jumping on camera and showing off their niche interests. By building a new medium, Jumprope could become the home for rapid-fire learning. And because viewers will have tons of purchase intent for the makeup, art supplies or equipment they’ll need to follow along, Jumprope could make serious cash off ads or affiliate commerce.
The opportunity to bring instruction manuals into the mobile video era has attracted a $4.5 million seed round led by Lightspeed Venture Partners and joined by strategic angels like Adobe Chief Product Officer Scott Belsky and Thumbtack co-founders Marco Zappacosta and Jonathan Swanson. People are already devouring casual education content on HGTV and the Food Network, but Jumprope democratizes its creation.
Jumprope co-founders (from left): CTO Travis Johnson and CEO Jake Poses
The idea came from a deeply personal place for Poses. “My brother has pretty severe learning differences, and so growing up with him gave me this appreciation for figuring out how to break things down and explain them to people,” Poses reveals. “I think that attached me to this problem of ‘how do you organize information so it’s simple and easy to understand?’ Lots and lots of people have this information trapped in their heads because there isn’t a way to easily share that.”
Poses was formerly the VP of Product at Thumbtack where he helped grow the company from 8 to 500 people and a $1.25 billion valuation. He teamed up with AppNexus’ VP of engineering Travis Johnson, who’d been leading a 50-person team of coders. “The product takes people who have knowledge and passion but not the skill to make video [and gives them] guard rails that make it easy to communicate,” Poses explains.
Disrupting incumbents like YouTube’s grip on viewers might take years, but Jumprope sees its guide creation and export tool as a way to infiltrate and steal their users. That strategy mirrors how TikTok’s watermarked exports colonized the web.
How to make a Jumprope
Jumprope lays out everything you’ll need to upload, including a cover image, introduction video, supplies list and all your steps. For each, you’ll record a video that you can then enhance with voice-over, increased speed, music and filters.
Creators are free to suggest their own products or enter affiliate links to monetize their videos. Once it has enough viewers, Jumprope plans to introduce advertising, but it could also add tipping, subscriptions, paid how-tos or brand sponsorship options down the line. Creators can export their lessons with five different border themes and seven different aspect ratios for posting to Instagram’s feed, IGTV, Snapchat Stories, YouTube or embedding on their blog.
“Like with Stories, you basically tap through at your own pace,” Poses says of the viewing experience. Jumprope offers some rudimentary discovery through categories, themed collections or what’s new and popular. The startup has done extensive legwork to sign up featured creators in all its top categories. That means Jumprope’s catalog is already extensive, with food guides ranging from cinnabuns to pot roasts to how to perfectly chop an onion.
“You’re not constantly dealing with the frustration of cooking something and trying to start and stop the video with greasy hands. And if you don’t want all the details, you can tap through it much faster” than trying to skim a YouTube video or blog post, Poses tells me. Next the company wants to build a commenting feature where you can leave notes, substitution suggestions and more on each step of a guide.
Poses claims there’s no one building a direct competitor to its mobile video how-to editor. But he admits it will be an uphill climb to displace viewership on Instagram and YouTube. One challenge facing Jumprope is that most people aren’t hunting down how-to videos every day. The app will have to work to remind users it exists and that they shouldn’t just go with the lazy default of letting Google recommend the videos it hosts.
The internet has gathered communities around every conceivable interest. But greater access to creation and consumption necessitates better tools for production and curation. As we move from a material to an experiential culture, people crave skills that will help them forge memories and contribute to the world around them. Jumprope makes it a lot less work to leap into the life of a guru.
You can watch my first Jumprope here or below to learn how to tie up headphones without knots:
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Instagram bug showed Stories to the wrong people
Today in “Facebook apps are too big to manage,” a glitch caused some users’ Instagram Stories trays to show Stories from people they don’t follow.
TechCrunch first received word of the problem from Twitter user InternetRyan who was confused about seeing strangers in his Stories Tray and tagged me in to investigate. The screenshots below show people in his Stories tray whom he doesn’t follow, as proven by the active Follow buttons on their profiles. TechCrunch inquired about the issue, and the next day Instagram confirmed that a bug was responsible and it had been fixed.
Instagram is still looking into the cause of the bug but says it was solved within hours of being brought to its attention. Luckily, if users clicked on the profile pic of someone they didn’t follow in Stories, Instagram’s privacy controls kicked it and wouldn’t display the content. Facebook Stories wasn’t impacted. But the whole situation shakes faith in the Facebook corporation’s ability to properly route and safeguard our data, including that of the 500 million people using Instagram Stories each day.
An Instagram spokesperson provided this statement: “We’re aware of an issue that caused a small number of people’s Instagram Stories trays to show accounts they don’t follow. If your account is private, your Stories were not seen by people who don’t follow you. This was caused by a bug that we have resolved.”
The problem comes after a rough year for Facebook’s privacy and security teams. Outside of all its scrambling to fight false news and election interference, Facebook and Instagram have experienced an onslaught of technical troubles. A Facebook bug changed the status update composer privacy setting of 14 million users, while another exposed up to 6.8 million users’ unposted photos. Instagram bugs have screwed up follower accounts, and made the feed scroll horizontally. And Facebook was struck by its largest outage ever last month, after its largest data breach ever late last year exposed tons of info on 50 million users.
Facebook and Instagram’s unprecedented scale make them extremely capital efficient and profitable. But that size also leaves tons of surfaces susceptible to problems that can instantly impact huge swaths of the population. Once Facebook has a handle on misinformation, its technical systems could use an audit.
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Instagram now demotes vaguely ‘inappropriate’ content
Instagram is home to plenty of scantily clad models and edgy memes that may start to get fewer views starting today. Now Instagram says, “We have begun reducing the spread of posts that are inappropriate but do not go against Instagram’s Community Guidelines.” That means if a post is sexually suggestive, but doesn’t depict a sex act or nudity, it could still get demoted. Similarly, if a meme doesn’t constitute hate speech or harassment, but is considered in bad taste, lewd, violent or hurtful, it could get fewer views.
Specifically, Instagram says, “this type of content may not appear for the broader community in Explore or hashtag pages,” which could severely hurt the ability of creators to gain new followers. The news came amidst a flood of “Integrity” announcements from Facebook to safeguard its family of apps revealed today at a press event at the company’s Menlo Park headquarters.
“We’ve started to use machine learning to determine if the actual media posted is eligible to be recommended to our community,” Instagram’s product lead for Discovery, Will Ruben, said. Instagram is now training its content moderators to label borderline content when they’re hunting down policy violations, and Instagram then uses those labels to train an algorithm to identify.
These posts won’t be fully removed from the feed, and Instagram tells me for now the new policy won’t impact Instagram’s feed or Stories bar. But Facebook CEO Mark Zuckerberg’s November manifesto described the need to broadly reduce the reach of this “borderline content,” which on Facebook would mean being shown lower in News Feed. That policy could easily be expanded to Instagram in the future. That would likely reduce the ability of creators to reach their existing fans, which can impact their ability to monetize through sponsored posts or direct traffic to ways they make money like Patreon.
Facebook’s Henry Silverman explained that, “As content gets closer and closer to the line of our Community Standards at which point we’d remove it, it actually gets more and more engagement. It’s not something unique to Facebook but inherent in human nature.” The borderline content policy aims to counteract this incentive to toe the policy line. Just because something is allowed on one of our apps doesn’t mean it should show up at the top of News Feed or that it should be recommended or that it should be able to be advertised,” said Facebook’s head of News Feed Integrity, Tessa Lyons.
This all makes sense when it comes to clickbait, false news and harassment, which no one wants on Facebook or Instagram. But when it comes to sexualized but not explicit content that has long been uninhibited and in fact popular on Instagram, or memes or jokes that might offend some people despite not being abusive, this is a significant step up of censorship by Facebook and Instagram.
Creators currently have no guidelines about what constitutes borderline content — there’s nothing in Instagram’s rules or terms of service that even mention non-recommendable content or what qualifies. The only information Instagram has provided was what it shared at today’s event. The company specified that violent, graphic/shocking, sexually suggestive, misinformation and spam content can be deemed “non-recommendable” and therefore won’t appear on Explore or hashtag pages.
[Update: After we published, Instagram posted to its Help Center a brief note about its borderline content policy, but with no visual examples, mentions of impacted categories other than sexually suggestive content, or indications of what qualifies content as “inappropriate.” So officially, it’s still leaving users in the dark.]
Instagram denied an account from a creator claiming that the app reduced their feed and Stories reach after one of their posts that actually violates the content policy taken down.
One female creator with around a half-million followers likened receiving a two-week demotion that massively reduced their content’s reach to Instagram defecating on them. “It just makes it like, ‘Hey, how about we just show your photo to like 3 of your followers? Is that good for you? . . . I know this sounds kind of tin-foil hatty but . . . when you get a post taken down or a story, you can set a timer on your phone for two weeks to the godd*mn f*cking minute and when that timer goes off you’ll see an immediate change in your engagement. They put you back on the Explore page and you start getting followers.”
As you can see, creators are pretty passionate about Instagram demoting their reach. Instagram’s Will Ruben said regarding the feed/Stories reach reduction: No, that’s not happening. We distinguish between feed and surfaces where you’ve taken the choice to follow somebody, and Explore and hashtag pages where Instagram is recommending content to people.”
The questions now are whether borderline content demotions are ever extended to Instagram’s feed and Stories, and how content is classified as recommendable, non-recommendable or violating. With artificial intelligence involved, this could turn into another situation where Facebook is seen as shirking its responsibilities in favor of algorithmic efficiency — but this time in removing or demoting too much content rather than too little.
Given the lack of clear policies to point to, the subjective nature of deciding what’s offensive but not abusive, Instagram’s 1 billion user scale and its nine years of allowing this content, there are sure to be complaints and debates about fair and consistent enforcement.
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Snap is channeling Asia’s messaging giants with its move into gaming
Snap is taking a leaf out of the Asian messaging app playbook as its social messaging service enters a new era.
The company unveiled a series of new strategies that are aimed at breathing fresh life into the service that has been ruthlessly cloned by Facebook across Instagram, WhatsApp and even its primary social network. The result? Snap has consistently lost users since going public in 2017. It managed to stop the rot with a flat Q4, but resting on its laurels isn’t going to bring back the good times.
Snap has taken a three-pronged approach: extending its stories feature (and ads) into third-party apps and building out its camera play with an AR platform, but it is the launch of social games that is the most intriguing. The other moves are logical, and they fall in line with existing Snap strategies, but games is an entirely new category for the company.
It isn’t hard to see where Snap found inspiration for social games — Asian messaging companies have long twinned games and chat — but the U.S. company is applying its own twist to the genre.
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Instagram founders say losing autonomy at Facebook meant “winning”
Rather than be sore about losing independence within Facebook, Instagram co-founder Kevin Systrom told me it was an inevitable sign of his app’s triumph. Today at South By South West, Systrom and fellow co-founder Mike Krieger sat down for their first on-stage talk together since leaving Facebook in September. They discussed their super hero origin stories, authenticity on social media, looming regulation for big tech, and how they’re exploring what they’ll do next.
Krieger grew up hitting “view source” on websites while Systrom hacked on AOL booter programs that would kick people off instant messenger, teaching both how code could impact real people. As Instagram grew popular, Krieger described the “incredi-bad” feeling of fighting server fires and trying to keep the widely loved app online even if that meant programming in the middle of a sushi restaurant or camping retreat. He once even revived Instagram while drunk in the middle of the night, and woke up with no memory of the feat, confused about who’d fixed the problem. The former Instagram CTO implored founders not to fall into the “recruiting death spiral” where you’re too busy to recruit which makes you busier which makes you too busy to recruit…
But thankfully, the founders were also willing to dig into some tougher topics than their scrappy startup days.
Kevin Systrom and Mike Krieger (from left) drive to Palo Alto to raise their Series A, circa January 2011
Independence vs Importance.
“In some ways, there being less autonomy is a function of Instagram winning. If Instagram had just been this niche photo app for photographers, we probably would be working on that app for 20 year. Instead what happened was it got better and better and better, and it improved, and it got to a size where it was meaningfully important to this company” Systrom explained. “If this thing gets to that scale that we want it to get to which is why we’re doing this deal, the autonomy will eventually not be there as much because it’s so important. So in some ways it’s just an unavoidable thing if you’re successful. So you can choose, do you want to be unsuccessful and small and have all the autonomy in the world, or no?”
AUSTIN, TX – MARCH 11: Mike Krieger speaks onstage at Interactive Keynote: Instagram Founders Kevin Systrom & Mike Krieger with Josh Constine during the 2019 SXSW Conference and Festivals at Austin Convention Center on March 11, 2019 in Austin, Texas. (Photo by Chris Saucedo/Getty Images for SXSW)
Krieger followed up that “I think if you study . . . all the current companies, the ones that succeed internally eventually have become so important to the acquiring company that it’s almost irresponsible to not be thinking about what are the right models for integration. The advice I generally give is, ‘are you okay with that if you succeed?’ And if you’re not then you shouldn’t do the deal.” If the loss of autonomy can’t be avoided, they suggest selling to a rocket ship that will invest in and care for your baby rather than shift priorities.
Asked if seeing his net worth ever feels surreal, Systrom said money doesn’t make you happy and “I don’t really wake up in the morning and look at my bank account.” I noted that’s the convenient privilege of having a big one.
The pair threw cold water on the idea that being forced to earn more money drove them out of the company. “I remember having this series of conversations with Mark and other folks at Facebook and they’re like ‘You guys just joined, do not worry about monetization, we’ll figure this out down the road.’ And it actually came a lot more from us saying “1. It’s important for us to be contributing to the overall Fb Inc . . . and 2. Each person who joins before you have ads is a person you’re going to have to introduce ads to.” Systrom added that “to be clear, we were the ones pushing monetization, not the other way around, because we believed Instagram has to make money somehow. It costs a lot to run . . . We pushed hard on it so that we would be a successful unit within Facebook and I think we got to that point, which is really good.”
But from 2015 to 2016, Instagram’s remaining independence fueled a reinvention of its app with non-square photos, the shift to the algorithm, and the launch of Stories. On having to challenge the fundamental assumptions of a business, “You’ve got maybe a couple years of relevance when you build a product. If you don’t reinvent it every quarter or every year, then you fall out of relevance and you go away.”
That last launch was inspired by wanting to offer prismatic identity where people could share non-highlights that wouldn’t haunt them. But also, Systrom admits that “Honestly a big reason why was that for a long time, people’s profiles were filled with Snapchat links and it was clear that people were trying to bridge the two products. So by bringing the two products [Feed and Stories] into one place, we gave consumers what they wanted.” Though when I asked anyone in the crowd who was still mad about the algorithm to hiss, SXSW turned into a snake pit.
Regulating Big Tech
With Systrom and Krieger gone, Facebook is moving forward with plans to more tightly integrate Instagram with Facebook and WhatsApp. That includes unifying their messaging system, which some say is designed to make Facebook’s apps harder to break up with anti-trust regulation. What does Systrom think of the integration? “The more people that are available to talk with, the more useful the platform becomes. And I buy that thesis . . . Whether or not they will in fact want to talk to people on different platforms, I can’t tell the future, so I don’t know” Systrom said.
AUSTIN, TX – MARCH 11: Josh Constine, Mike Krieger and Kevin Systrom speak onstage at Interactive Keynote: Instagram Founders Kevin Systrom & Mike Krieger with Josh Constine during the 2019 SXSW Conference and Festivals at Austin Convention Center on March 11, 2019 in Austin, Texas. (Photo by Chris Saucedo/Getty Images for SXSW)
Krieger recommended Facebook try to prove users want that cross-app messaging before embarking on a giant engineering challenge of merging their backends. When I asked if Systrom ever had a burning desire to Instagram Direct message a WhatsApp user, he admitted “Personally, no.” But in a show of respect and solid media training, he told his former employer “Bravo for making a big bet and going for it.”
Then it was time for the hardest hitting question: their thoughts on Presidential candidate Senator Elizabeth Warren’s proposal to regulate big tech and roll back Facebook’s acquisition of Instagram. “Do we get our job back?” Systrom joked, trying to diffuse the tension. Krieger urged more consideration of downstream externalities, and specificity on what problem a break up fixes. He wants differentiation between regulating Facebook’s acquisitions, Amazon white-labeling and selling products, and Apple’s right to run the only iOS App Store.
Acquisition vs Competition
“We live in a time where I think the anger against big tech has increased ten-fold — whether that’s because the property prices in your neighborhood have gone up, whether it’s because you don’t like Russian meddling in elections — there are a long list of reasons people are angry at tech right now and some of them I think are well-founded” Systrom confirmed. “That doesn’t mean that the answer is to break all the companies up. Breaking companies up is a very specific prescription for a very specific problem. If you want to fix economic issues there are ways of doing that. If you want to fix Russian meddling there are ways of doing that. Breaking up a company doesn’t fix those problems. That doesn’t mean that companies shouldn’t be broken up if they get too big and they’re monopolies and they cause problems, but being big in and of itself is not a crime.”
attends Interactive Keynote: Instagram Founders Kevin Systrom & Mike Krieger with Josh Constine during the 2019 SXSW Conference and Festivals at Austin Convention Center on March 11, 2019 in Austin, Texas
Systrom then took a jab at Warren’s tech literacy, saying “part of what’s surprised me is that generally the policy is all tech should be broken up, and that feels to me again not nuanced enough and it shows me that the understanding of the problem isn’t there. I think it’s going to take a more nuanced proposal, but my fear is that something like a proposal to break up all tech is playing on everyone’s current feeling of anti-tech rather than doing what I think politicians should do which is address real problems and give real solutions.”
The two founders then gave some pretty spurious logic for why Instagram’s acquisition helped consumers. “As someone who ran the company for how many years inside of Facebook? Six? There was a lot of competition internally even and I think better ideas came out because of it. We grew both companies not just one company. It’s really hard question. What consumer was damaged because it grew to the size that it did? I think that’s a strong argument that in fact the acquisition worked out for consumers.” That ignores the fact that if Instagram and Facebook were rivals, they’d have to compete on privacy and treating their users well. Even if they inspired each other to build more engaging products, that doesn’t address where harm to consumers has been done.
Krieger suggested that the acquisition actually spurred competition by making Instagram a role modeI. “There was a gold rush of companies being like ‘I’m going to be the Instagram of X . . . the Instagram of Audio, the Instagram of video, the Instagram of dog photos.’ You saw people start new companies and try to build them out in order to try to achieve what we’ve gotten to.” Yet no startup besides Snapchat, which had already launched, has actually grown to rival Instagram. And seeing Instagram hold its own against the Facebook empire would have likely inspired many more startups — some of which can’t find funding since investors doubt their odds against a combined Facebook and Instagram
As for what’s next for the college buddies, “we’re giving ourselves the time to get curious about things again” Krieger says. They’re still exploring so there was no big reveal about their follow-up venture. But Systrom says they built Instagram by finding the mega-trend of cameras on phones and asking what they’d want to use, “and the question is, what’s the next wave?”
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