Instagram vs. Hipstamatic
I don’t know the folks at Synthetic Corp, the makers of the very popular Hipstamatic retro iPhone photo filter app, but I’ll tell you this—they came damn close. I want to analyze their situation for a moment.
Hipstamatic did almost everything right. They were first to market, launching in December 2009. Their product functioned perfectly. Hipstamatic had fantastic design from day one. On top of it all, they nailed the marketing by making it desirable, hip and giving it a backstory. Oh and they had a revenue model too selling the app and the in-app purchases for virtual lenses and film! (Imagine that—revenue!!!) Did I mention they won the coveted iPhone APP OF THE YEAR award in 2010 from Apple? From Apple! iPhone App of the Year!
Instagram, on the other hand, launched late coming out of Beta nearly a year after Hipstamatic in September 2010. In the world of mobile apps, a year is nearly an eternity. On the surface, many of the differences between the two products seemed somewhat subtle—both apps had retro iPhone photo filters, both had cutesy iOS hipster camera icons and both allowed you to share your photos to the outside world. Sure, Instagram was more social than Hipstamatic with the built-in photo feed and ability to follow users and “like” photos, but come on?! Another social network?! This is 2010! Who needs another social network?! You’re supposed to build everything on Facebook and Twitter these days, right?!
Success is actually a pretty subtle phenomenon. You can do pretty much everything right, but not be the billion dollar company. The distance between Instagram & Hipstamatic or Dropbox & SugarSync is quantum: simultaneously pretty damn small and yet insurmountably large at the same time.
With 20/20 hindsight we can say that Instagram chose the winning strategy because photos are the killer social app and thus were really the first company to legitimately challenge Facebook. That made them easily worth just the ~1% of market cap pittance they were paid out even if that if that 1% translates into $1 billion.
So what’s the lesson here? The lesson is simply: understand where your value comes from. At the end of the day the only real difference between Instagram and Hipstamatic was that Instagram knew that the value of a theoretical $1mm/year in revenue from a million users buying virtual lenses was less valuable than those same million users spending $0 but interacting socially and inviting millions more to eventually join them—they knew where the value would be created. Riskier? Hell yes. But it was also probably the only way to build the billion dollar company here.
Note: None of this is meant at all as a criticism of Synthetic Corp in the least. Hipstamatic is fantastic. I was an early purchaser of their app and have no doubts they already have a large and interesting business and will continue to grow that business.