Instagram Sold for $1 Billion With Almost No Revenue

In the autumn of 2009, Kevin Systrom had a day job, a Stanford degree and an app nobody needed. He was building it in the evenings. It was called Burbn, after his taste in whiskey, and it let people check in at places, make plans with friends and post photos. It did a lot of things. Not many people used it.

In March 2010 Systrom raised $500,000 for Burbn from two investors, Baseline Ventures and Andreessen Horowitz. He used some of it to hire a cofounder, Mike Krieger, a fellow Stanford graduate. Together they studied what Burbn’s few users actually did.

The answer was simple. They posted pictures.

One thing, done well

So Systrom and Krieger made a decision most founders find painful. They threw away almost everything they had built. They kept the photos, added comments and likes, and wrote filters that made the poor cameras on early smartphones produce something that looked like a print from an old instant camera. They named the result Instagram, from “instant camera” and “telegram.”

It launched on the iPhone on October 6, 2010. It was free, fast and simple: take a picture, choose a filter, share it. About 25,000 people signed up on the first day. By mid-December there were a million.

The timing helped. Apple’s iPhone 4, released that June, had a much better camera than earlier phones, and millions of people were suddenly carrying a decent camera everywhere. Instagram gave them a reason to use it and an audience to show the results to. In January 2011 it added hashtags, so strangers could find each other’s pictures. By the end of that year, the company said, users had uploaded about 400 million photos.

The money followed the users. In February 2011 Instagram raised $7 million. It still had no advertising and no revenue. What it had was growth, and growth on phones, which was exactly where the internet was moving.

Facebook’s problem

By early 2012 Facebook had a problem of its own. It was preparing to go public, and its future depended on mobile phones, where its app was slow and clunky. People, and especially young people, were spending more of their lives on their phones. On phones, Instagram was where photos were going.

In the first week of April 2012 two things happened at once. Instagram released its Android app, and more than a million people downloaded it in 12 hours. And it closed a new funding round of $50 million, led by Sequoia Capital, that valued the company at $500 million. Weeks earlier, its founders had said they were not interested in selling.

Mark Zuckerberg moved fast. Systrom already knew him: Zuckerberg had offered him a job at the early Facebook while Systrom was still a student at Stanford, and Systrom had turned it down to finish his degree.

A billion dollars for 13 people

On April 9, 2012, Facebook announced that it would buy Instagram for $1 billion in cash and stock. It was Facebook’s largest acquisition by far. Instagram had about 30 million users and, by widely reported counts, 13 employees.

Zuckerberg wrote that it was the first time Facebook had bought a product with so many users, and that it did not plan to do many more deals like it. He promised to keep Instagram running as its own app, not to fold it into Facebook. Until then Facebook had mostly bought small companies to hire their engineers and then shut them down.

Many people called the price absurd. One banker told Reuters there were no traditional valuation metrics that could justify it. CNNMoney pointed out that Yahoo had paid only a small fraction of that for Flickr, another popular photo site, seven years earlier. The investors who had put in $50 million a few days before at a $500 million valuation had doubled their money on paper in a week. Reports at the time estimated that Systrom owned about 40% of the company and Krieger about 10%.

A billion that shrank, then grew

The deal took months to close, because regulators in the United States and Britain had to approve it. In the meantime Facebook went public, in May 2012, at $38 a share, and the shares fell.

That mattered, because most of the price was paid in stock. The deal was $300 million in cash and about 23 million Facebook shares. When it closed in early September, Facebook’s stock was trading around $18, and the whole package was worth about $715 million. Sixteen Instagram employees moved to Facebook’s offices in Menlo Park. By then the app had about 80 million users.

What happened next made the argument about price irrelevant. Instagram showed its first advertisements in 2013, a year after the deal, and they slotted into the feed so naturally that the app became one of the most valuable places to advertise on the internet. Stories, copied from Snapchat, arrived in 2016, and short Reels videos in 2020. Instagram reached 1 billion monthly users in 2018 and 2 billion in 2022. In September 2025 Zuckerberg said it had passed 3 billion. Some analysts estimated it would bring in more than half of Meta’s advertising revenue in the United States that year.

The case about the purchase

The deal had one more chapter. In 2020 the Federal Trade Commission sued Meta, as Facebook was now called, arguing that it had bought Instagram and WhatsApp to remove rivals before they could challenge it. The FTC pointed to a 2008 email in which Zuckerberg wrote that it was better to buy than compete.

Zuckerberg testified in 2025 that he had bought Instagram to build it, not to bury it. In November 2025 Judge James Boasberg ruled for Meta. Whatever the past, he wrote, the FTC had not shown that Meta held a monopoly now, in a market that included TikTok and YouTube. Meta did not have to sell Instagram.

What the record shows

• Less can be worth more. Instagram succeeded after its founders cut their app down to the one feature people loved.
• Value can come before revenue. Facebook paid $1 billion for users and position, not for profits.
• Paying in stock moves risk. When Facebook’s shares fell, the value of the deal fell with them.
• Some purchases are defensive. Part of what Facebook bought was the certainty that no one else would own Instagram.

Two years later Facebook paid far more for another young app: WhatsApp cost $19 billion. Six years before Instagram, Google had set the template with YouTube, for $1.65 billion. And for a much older story of a buyer who saw value others missed, read how Asa Candler bought Coca-Cola.