How Facebook Set the Gold Standard for Acquisitions, Until Now
By: Laura Rich
Tags: Entrepreneurship, Instagram, Startup Life, Mergers And Acquisitions, Facebook

Instagram founders Kevin Systrom and Mike Krieger in the early days

When Facebook bought Instagram in 2012, they did this really remarkable thing: They left them alone. You didn’t see your Instagram automagically suddenly showing up in your FB feed. You didn’t get all those cool filters on your FB photos. And you weren’t giving over massive amounts of data through your Insta feed.

This. Never. Happens.

Here’s how it usually goes down: Buyers believe they know more about the business than those who were running it, pushing the founders aside and taking over. Sometimes, as in the case of Julie Clark, the founder of Baby Einstein, they give you the title of creative consultant — but fail to consult you or appreciate your creativity (listen to Julie’s story on The Exit Club podcast). Other times, as with Dave Will, who sold online learning platform Peach New Media, they say they’re acquiring your culture of openness, transparency and inclusion — and then proceed to make decisions behind closed doors. Founders of an organic juice business were surprised when their books were being cooked, by their new parent company, and had to hire a forensic accountant and sue to get the earn-out payments they were due.

In other words, the Facebook acquisition was a bed of roses for Kevin Systrom and Mike Krieger.

The Facebook Acquisition Blueprint

Facebook left Instagram completely alone. They gave them money and resources and that’s why the founders stayed put instead of jumping ship within a year as so many founders — especially those who create really big-deal things — often do.

It wasn’t always certain this is the way it would go. When the deal happened, in 2012, Mark Zuckerberg wrote something that sounded like more integration was in the offing:

This is an important milestone for Facebook because it’s the first time we’ve ever acquired a product and company with so many users. We don’t plan on doing many more of these, if any at all. But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together.

And yet, they really didn’t bring the two companies together. Early on, they added a way for Instagram users to also post to Facebook — though there are many similar integrations that happened for about a billion dollars less than this one. And in 2016, four years after the deal, they developed an integrated dashboard for business customers to manage campaigns across Instagram, Facebook and Messenger. Certainly, this was a promise of the power of uniting two social media juggernauts into a powerful marketing ecosystem with a broader view into consumer habits.

But that has basically been about it. Six years, a few ho-hum integrations and a massive increase in the value of Instagram, from the $1 billion Facebook paid to north of $100 billion today. For all the slagging that goes on when it comes to Facebook, they pretty much set the gold standard here on how to handle acquisitions. (Until recently, when they began to pull back on Instagram’s autonomy, following so many other acquirers down this fraught path.)

Facebook’s Acquisition Challenge Going Forward

What Facebook does next may or may not have any material impact on the experience most users have. Though it could easily go the way of so many acquisitions and leave employees and users alienated, it does seem as though it would be difficult to dismantle the success that is Instagram. After all, how many times have you heard that another Facebook will come along to replace Facebook?

Now, here’s what could go wrong if FB ignores it:

If Insta employees were attached only to Kevin and Mike, they may have a hard time taking orders from new leadership, and they are well past their vesting period that might otherwise keep them there. On Oct. 1, Facebook named longtime exec Adam Mosseri as Instagram’s new CEO. At least the title indicates independence.

If Facebook is now calling the shots from on high for every business it acquires, startups with other options may be less interested in working with them. The founder of WhatsApp left earlier this year after conflicts over data privacy and the messaging app’s business model (not surprisingly, Facebook wanted to run ads). Still, WhatsApp remains pretty popular around the world.

So, is this the “end of Instagram as we know it,” as The Verge has claimed? Maybe. But if you’re a founder, this story still has a very good ending.

This story is published in The Startup, Medium’s largest entrepreneurship publication followed by + 374,357 people.

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