
An Open Letter To Those Not Employed At Instagram  - psycho
http://techcrunch.com/2012/04/15/an-open-letter-to-those-not-employed-at-instagram/
======
gdubs
"Instagram’s competitive advantage comes from being first."

Actually, Facebook was first. They've been calling themselves the biggest &
best photo sharing app for quite some time now; long before Instagram existed.
By this Author's logic, Instagram shouldn't have bothered.

Being first is good, but being great is better. That was the motivation behind
the Mac OS, the iPhone, the iPad, etc, right? None of those things were the
first in their categories.

~~~
pud
I started mobile photo sharing site Mobog.com in 2003. Instagram was executed
about 10,000% better.

<http://mobog.com>

~~~
mkr-hn
Your site was ahead of its time. Instagram had 7 years of improvements in the
state of mobile hardware and software to build on top of.

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grinalds
Enterprise sales has its own set of issues which lead to generally a long
sales cycle.

Corporate inertia, difficulties finding key decision makers, the start-up
stigma (no big company wants to be reliant on a start-up that might not be
around in a year's time.)

These roadblocks make it difficult for enterprise-focused start-ups to
diagnose lack of traction. Is it product? Distribution? Market?

These issues aren't as pronounced in consumer internet start-ups. The end-user
is your target (not some manager who will never use/understand the product),
and fortunately around here, users are willing to try most anything. Think of
how many apps you have downloaded that you don't use anymore.

Start-ups are inherently hard, and each market has its own set of challenges.

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amirmc
I honestly can't remember the last time someone cited "first-mover advantage"
when talking about startups.

I'm genuinely surprised to see it writ here about a _photo-sharing_ app.

~~~
rhizome
And not even a mention of Hipstamatic.

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JCB_K
Google wasn't first. Facebook wasn't first. They both make their money from
consumers, and guess what? They're doing a pretty good job at it.

And from the author's viewpoint (Instagram is just "a few filters [...] a few
sharing options") Instagram wasn't first either; Hipstamatic was doing the
same thing way before them, with a different business model.

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liuliu
It is nonsense. The Internet is slowly, but firmly diminishing the mysterious
enterprise market, not the other way around. It is the same analogy why
middleman (brokers) slowly eroded by the same force.

I will start from the middleman market. Middlemen are all about information
asymmetry. i.e. someone knows something that others don't. The knowledge
freedom that the Internet provides largely destroyed the asymmetry (knowledge
gap). It is no secret that now you don't need a middleman to "brand" your
music/film/video game. Instead, the leverage of social network (Twitter,
Facebook, reddit etc.) enable one to market himself directly or at lower cost.
That's why currently music/movie industry is under attack from two sides, both
the production and the consumption. They can control neither. And this is the
death of middleman market.

The same analogy can apply to enterprise market. Traditionally, it requires a
long cycle to negotiating and shipping product to selected few big corps. At
that case, the leverage is "information asymmetry" as well. That's why you
cannot find a price quote on IBM's supercomputers, or any enterprise
software/hardware. But, it is transforming too. The ubiquitous openness and
flatness provided by the Internet making such man-made "information asymmetry"
useless. And traditionally "consumer-facing hardware/software can penetrate
enterprise market as well. That's why RIM is losing in enterprise market to
Apple, and that's why Intuit is taking over accounting software market.

P.S. I am considering product for small businesses as consumer-facing product
as well since it serves sufficient many customers comparing to traditionally-
defined "enterprise market".

~~~
majani
'The main reason middlemen exist is information asymmetry'

I don't think so. The main reason middlemen exist is because there are many ,
many things people just couldn't be bothered to do themselves.

~~~
liuliu
That's why you have computer now. If no one want to do it, then it can be
automated.

------
snarf
This "op-ed" completely ignores the negative aspects of working on enterprise
software. Much of the work isn't very interesting to tech/design aficionados
since a lot of the problems being solved are more about capturing and making
business processes more efficient rather than technology or design challenges.
You mostly work with more mature technologies since Fortune 500 CIO types
typically have an aversion to the latest cutting edge technology and would
rather go with something tried and true. And the marketing and sales (and
often times the deployment) of enterprise software is still slow, inefficient,
and bloated -- think sales VPs and CIOs on exotic golf outings.

------
johnrob
I've come to realize that the distinction between enterprise and consumer is
trivial. There is one basic rule for all businsses: solve a problem that is
important to someone. Wanting your phone's pictures to look better turns out
to be a valuable problem for many people. One nice thing about the enterprise
space is that there is a tradition of paying for things of value. But
instagram's lack of paying users does not imply a lack of value being added.
And there's almost always a way to monetize a product that is important to
someone.

Perhaps a more direct message from this article could have been: "Just because
you target consumers doesn't mean you can avoid solving an important problem".
Consumer products fail for the same reason enterprise ones do: their products
are not important to anyone.

~~~
dkrich
> But instagram's lack of paying users does not imply a lack of value being
> added. And there's almost always a way to monetize a product that is
> important to someone.

Whoa, hang on a sec there. Do you really believe that is true? If it is, then
why couldn't Instagram make money from the app itself? If they could, why
didn't they?

I'm pretty sure that if I bake cookies and go hand them out, people will take
them. Knowing that people will consume my cookies in large quantities if I
give them away is a long way from creating a successful, sustainable business
out of the popularity of my free cookies. I'm sure my cookies are important to
the people to whom I am giving them, but does that mean that I can monetize my
free cookies in ways other than charging for the cookies? I doubt it. But
let's be honest, that's exactly what we're talking about here- giving away a
useful service with the assumption that I can make money by doing something
else related to the service in the future. I still don't understand why these
economics apply to internet companies and not more traditional companies, but
I guess I am just old-fashioned.

~~~
drumdance
Instagram is a media company. They're only just now reaching a size where
their audience is big enough for advertisers to care.

It's not just Internet companies that do this - practically all media start
out in the red and don't make money for at least a couple of years. CNN, as an
old media example, basically gave away advertising for its first several years
of existence.

~~~
dkrich
But that's not what happened here. Instagram, to my knowledge, has never made
a penny off of advertising. There is no clear business model. Maybe it's
advertising. Maybe it's charging for additional filters. Nobody really knows,
not the Instagram founders and not Facebook executives.

How does anybody know whether a business would pay for advertising on a photo
sharing app? People are always talking about "just turning on the profit
spigot" whenever you want. I don't see any evidence that it is that easy.

------
dkrich
So wait, you're saying a business is supposed to make money by selling
something? You just blew my mind. I'm going to go out on a limb and say that
what you are professing here applies to other businesses that have nothing to
do with enterprise software. Or any software for that matter. In fact, I am
going to go so far as to suggest that there are only three businesses set up
to not make money- social media-related startups, government programs, and
charities. If you are not starting a social network/gaming/photo-
sharing/location-like thing, this Instagram acquisition story should pass you
by like a ship in the night.

~~~
drumdance
You forgot media companies. They don't make money out of the gate either, and
often not for several years.

------
ashconnor
Articles like this annoy me. I just don't see many developers or startups
being dumb enough to think they will actually be bought out by the companies
listed (even with a large user base).

It's _kind_ of like American Idol or X Factor; yeah there is a small chance of
making it big, but most realise that the competition is tough and monetising
startups can be very hard. Not like that is anything to worry about when being
bought out, so it seems...

~~~
tensor
I think American Idol is a really good analogy. Companies like Instagram and
OMGPOP are not technical wonders nor do they have great business plans. Hell,
even the ideas of their _winning_ apps are not new. But they won the
popularity contest and thus cashed out. They CEOs instantly becoming the tech
worlds equivalent of pop stars.

There is a more interesting question for investors and observers: Is this
trend permanent or is it signalling that we are in another bubble that will
one day collapse? If these companies lose their popularity is their value
zero? Popularity is a volatile thing to ride billions of dollars on.

------
nanijoe
If Instagram is an anecdote , then what are Reddit, OMGPOP, NewToys etc etc?
How about 37 signals etc? A billion dollar exit is not the only reason to
start a company or work for a startup

~~~
uxp
_A billion dollar exit is not the only reason to start a company or work for a
startup_

That's actually what I got from the editorial. A billion dollars shouldn't be
your motivation to bootstrap a startup or look to VCs to turn a hobby project
into a fledgling company, because 99.5% of the time you'll be disappointed in
your constant stream of failure. There are reasons people start companies. If
your reason is to get bought out for a billion, you might want to rethink your
goals.

A billion dollars can happen, and you might want to look forward to it, but in
the mean time you'll need to figure out how to get your first 10 customers to
fork over some money so you can pay your webhost or landlord in order to fight
another month.

------
drucken
Something mildly condescending and irritatingly simplistic about this
article... I understand his loose attempt at the general point about
enterprise customer base and enterprise valuation.

But great companies exist _despite_ "intellectual property" (another loose
term), not because of it, especially in the realm of software - i.e. it simply
is not the driving concern for _creating_ either a great enterprise or
startup! Think about it...

The author also seems to have completely ignored disruptive technologies and
applications of them, i.e. it is not about being first for the sake of it -
look at Xerox etc.

------
mstefanko
As others said, instagram wasn't the first to do this, and that is certainly
not why they were bought out for 1 billion or why so many users adopted the
service. Instagram didn't fill a huge gap, they made something people wanted
to use. The article misses a couple beats, but I don't think the focus of it
is completely misguided. A valuation and a buy out like this does not happen
very often, and when it does happen, it draws the wrong kind of attention. All
of a sudden a lot of people think they can do the exact same thing, that they
can spend some time on the weekend and release a better version of instagram,
then BAM money--fame. It's just now how things work.

I don't think instagram is completely invulnerable to the market. As a user of
it, I'd happily adopt a different service that did the exact same thing
better, and I don't think I'm alone. So in that sense, this article misses the
mark. But I'd rather read this article than one that tells people they can do
it too. It's a once-and-a-lifetime valuation. The service itself may be
reproduceable but the results far from it, and in that vein the article speaks
the truth. Your time is better spent elsewhere.

------
wensing
The first mover advantage is the way we describe winning products (value
propositions) in hindsight. They are almost never, ever temporally first in
any regard except the first to bundle together the right set of experiences.

------
OoTheNigerian
DailyBooth was first to this 'just photos' social network scene. I just don't
know what happened to them.

Before, I'll say first to execute well wins. But I thought DailyBooth did
well.

Maybe they did not take mobile as very important?

------
dromias
Good God, another Instagram article?

------
excuse-me
So did instagram really get $1Bn?

Or did the VCs who own Instagram also own Facebook and so just moved some
numbers from one cell in a spreadsheet to another - netting themselves huge
amounts of publicity before the Facebook IPO (and probably a tax break
somewhere)

~~~
gbog
Interesting claim, anything to back it up?

~~~
excuse-me
Facebook had an income of about $500M last year and $200M the year before - so
I doubt they had $1Bn in cash sitting around to pay in used dollar bills.

I imagine some sort of IPO/options/notes financial complexity so no actual
folding money changed hands

~~~
verroq
I'm fairly sure some was paid in facebook stock.

~~~
gonzo
"cash and stock".

I'm sure the VCs are all giddy to own a bunch of pre-IPO Facebook shares.

------
leovinci
> Instagram’s competitive advantage comes from being first.

first in what? first in photo sharing or first in image processing?

first in what?

------
methoddk
The author sounds sad.

Also: Articles like this is why TC stinks.

------
rodly
Can we dig up some information on the author? Instagram clearly disowned him
somehow.

~~~
stanleydrew
In the amount of time it took you to write this comment you could have typed
"Alexander Haislip" into Google and spared all of us having to read it.

~~~
RegEx
> In the amount of time it took you to write this comment you could have typed
> "Alexander Haislip" into Google

True

> and spared all of us having to read it.

Unnecessary.

