In Menlo Park with Kevin Systrom as his billions-a-year company guns for its share (and more) of the coming $17 billion market in digital video with an unfiltered swipe at rival Snapchat and help from celebrity friends.
It's a scorching July afternoon, and a soundtrack of pop hits is bumping inside a cavernous Hollywood photo studio where Selena Gomez and Kevin Hart have gathered for a shoot with Instagram CEO Kevin Systrom. The singer and comedian have spent the past few hours prepping with stylists for a series of professional, meticulously crafted photos seen here. But at the moment, Gomez, her petite frame decked in chic separates by The Row and Calvin Klein, has co-opted the set, motioning for the equally diminutive Hart to pull his tiny white Ferrari closer to the humongous black Dodge Ram truck she arrived in a few hours earlier. "We've got to get this shot," she says, leaning back on the sports car as a crowd of handlers and THR staff forms around them. Gomez motions to the onlookers, their phones raised in unison, ready to capture the moment as Systrom looks on with a smile. A few hours later, Hart posts the photo on his Instagram page; within days, it quickly amasses more than 350,000 likes.
In the fast-moving world of social media, where Snapchat is the new Twitter is the new Facebook is the new MySpace, Instagram has managed to mostly steer clear of the are-they-cool-or-aren't-they debate. Less than 6 years old, the company — co-founded by Systrom and owned since 2012 by Facebook as an independent division — recently topped 500 million users (leaving Twitter's 310 million in its wake and nearly a third of the way to Facebook's 1.65 billion) and is the app of choice for a predominantly young, female-skewing audience. That's nowhere more apparent than in Hollywood, which has rushed to sign the "Insta-famous" (The Fat Jew has landed at CAA and recently appeared in the Zoolander sequel) and writes Instagram promotion requirements into actors' movie deals. In a media landscape where pictures of Taylor Swift's Fourth of July party become international news and Beyonce responds to the police shootings of two black men with a heartfelt post, Instagram has gone mainstream.
But despite the success, pictures, in the media ecosystem, have about as much value as words — which is to say, not much. Today, The Graduate's Benjamin Braddock would be told the future in one word is "video." And Instagram now finds itself in an arms race to win — competing not only against other social platforms but also against all media chasing a piece of the $17 billion in advertising that eMarketer expects to flood the digital video market by 2020.
"It's a huge opportunity," says Cowen and Co. internet analyst John Blackledge, who notes that social and video platforms will be on the receiving end as marketers shift their $200 billion in global television ad spend to digital. "The train has left the station. There's going to be a long-term shift over to digital."
This is where such celebrities as Gomez and Hart come into play. Instagram credits them, and others socially savvy enough to have a top account, with fueling its recent video boom by posting more than twice the number of videos each day as they did in 2015. When Instagram expanded its video length this year from 15 seconds to 60 seconds, the singer and the comedian each had 60-second clips at the ready: Gomez in the studio working on a new song, Hart on a safari during a comedy tour stop in South Africa. "I was so stoked when Kevin [Systrom] told me they were doing 60 seconds," says Gomez, who in March became the most followed person on the app (89 million). "I feel like you're really allowed to share what your life is, and I found that people respond really well to organic, fun videos."
No one understands how important video has become to Instagram better than its 32-year-old co-founder and CEO. "We're watching this space very closely," says Systrom from across a marble conference table at Instagram's Menlo Park, Calif., offices in May. Later, during the course of his interview, he searches for a way to sum up the position that Instagram — and Facebook and Twitter — are in and finally comes up with the words: "What we're trying to figure out — and, I think, what every other company is trying to figure out — is we're all drilling for oil in this big field of video. And it's like, where are you going to hit it? What's the next, biggest opportunity?"
Instagram, which sits ensconced in a small corner of Facebook's sprawling headquarters on the aptly named Hacker Way, is an easy hourlong flight from the Hollywood community that has become infatuated with its app. But it feels a world away. It's only once inside the bland-looking corporate office park that Instagram's neon pink new logo becomes visible, plastered against a wall to commemorate its May rebrand. Lining the office are posters that proclaim, "Keep Doing."
Systrom, eager to hear how users have responded to the recent video push, has assembled three of his product managers on plush couches and chairs in the conference room that serves as his de facto office. Video, he explains to his team, "is probably the most important area" for the company this year. With people watching 150 percent more video on the app than they were just six months ago, Instagram has released updates meant to stoke the creation and consumption of this content (and, yes, to monetize it more effectively via ads, which are embedded in people's feeds like any post). In February, the company added view counters to showcase just how many people are watching clips, and it has begun giving videos top billing under the "Explore" tab, where it highlights popular and selected-for-you posts.
Instagram is making the bold bet that the millions of celebrities, photographers, famous pets and regular Joes who post photos on the app are clamoring for more video, too. That's hardly a sure thing, but initial reaction is encouraging. "A lot of the longer videos are seeing really high engagement," says a product manager, dressed in Silicon Valley standard blue jeans.
Hart is among the celebrities who have taken to the format. On July 7, he posted a clip responding to the recent police shootings. He uses the service for less serious messages, too. By expanding the limit to 60 seconds, "your Instagram becomes a movie trailer, movie teaser or movie promotion platform, and it also becomes your own promotional platform," he says.
But for all the early momentum, there are hurdles. Digital marketers and social media managers say Instagram videos can drive less engagement overall than photos, something even the prioritization of views over likes doesn't completely shield. "The fact that they're showing us views now gives us a sense of, 'Yeah, they might not be liking it, but they're watching it.' That's the engagement that we want, ultimately," says Luigi Picarazzi, who runs social media agency Digital Media Management and counts Nicole Kidman and Elizabeth Banks as clients. "But I do think Instagram's going to need to find what type of video works on the platform. Fifteen-second videos are still the preferred length and what users ultimately want to see on the platform because it's not one we've established a longform relationship with."
As if to further highlight just how important video will be for Instagram, reports surfaced in June that the app, much like Facebook, has experienced a decline in sharing, meaning people are posting less on average. Systrom's response: "We are not slowing down with growth." Still, it's a challenge that appears tied to the fact that people increasingly are drawn to the raw, unfiltered moments they find on platforms like Snapchat and Twitter-owned Periscope, where the experience is live or semi-live. There isn't as natural an interaction on Instagram, where beautiful, carefully selected images generally are rewarded with more likes, says Jeremy Liew, an early Snapchat investor via Lightspeed Venture Partners. "That creates a lot of performance anxiety. It's gotta be good," he says. "So the ratio of people posting on Instagram is going to be dramatically lower than it is on something like Snapchat, where there's no such thing as bad Snap or a good Snap."
In addition, Snapchat appeared to go after Instagram and Facebook directly July 6, when it unveiled a new product, Memories, for saving and reposting old photos. "There are always going to be more companies," counters Systrom, who then takes a veiled swipe at the competition: "If you want to take a simple photo that you don't really want to remember and post it to have your friends not see it after, there are great networks for that."
But it's not a zero sum game, says Matt Cohler, an early Instagram investor through venture capital firm Benchmark, which also was an early Snapchat investor. Video, he adds, "is a huge movement, and it's positive for everybody that the companies that really matter start to figure this out."
With 300 million people opening Instagram each day, the app still is more than twice the size of Snapchat, which last reported in January that it had 100 million daily users. While Blackledge suggests Instagram's biggest challenge in video will be keeping people engaged, he says the rate at which the app is growing is a sign that it's still a healthy business. "It's the network effect," he adds. "Only a couple platforms have it, and it's the foundational characteristic for which network is going to win in the end." More than 80 percent of Instagram's users live outside the U.S., and studies show that it attracts more 18-to-29-year-olds than Pinterest, LinkedIn or Twitter.
It's not lost on Systrom that Instagram will need to create a different relationship with its users through video than it has through photos. "Public video that competes with photos is very hard," he acknowledges. "It's gotta be a little bit more intimate. It's gotta be a little bit more raw." That's where apps like Hyperlapse, which Instagram launched two years ago and compresses up to 45 minutes of footage into a few seconds, and 9-month-old Boomerang, which creates GIF-like moving images, come in.
Systrom sees in these apps the opportunity to make posting videos more accessible to the masses, much in the way Instagram's filters help amateurs take professional-looking photos. "When I went to the Met Gala, my feed was just overwhelmed with Boomerangs," he explains. "It's a great way to show fashion, it's a great way to be funny. That's the way you do it — you lower the bar for making video awesome."
It would be easy to assume every tech executive fits the mold of the socially inept characters from HBO's Silicon Valley. But Systrom, a Stanford graduate and Google alum, has a polish that is rare among founders with his pedigree. He's a regular fixture in the front row of runway shows, hobnobs with celebrity Instagrammers at the Met Gala and Oscar parties and regularly posts 'grams of friends Jamie Oliver and Karlie Kloss. Still, the slim, 6-foot-5 Massachusetts native (he's training for a half marathon) insists he has more in common with Pied Piper founder Richard Hendricks than is apparent. "In high school, I was probably voted most likely to be a computer programmer for life or something," says Systrom, who in October married college sweetheart Nicole Schuetz, a clean energy investor, in a Napa, Calif., ceremony revealed in a photo gallery on Vogue.com. "I was — and still am, by the way — tall, nerdy, awkward."
Any awkwardness hasn't hindered Instagram's relationships with artists and actors, who were quick to start posting photos not long after the app debuted in 2010 (it had 25,000 users just 24 hours after launch). Snoop Dogg is believed to be the first celebrity user, but by the time Facebook founder and CEO Mark Zuckerberg agreed in 2012 to buy Instagram for $1 billion after a fitful weekend of dealmaking, it already counted Swift, Lena Dunham and Zooey Deschanel among its 30 million users. Cohler calls Systrom and co-founder Mike Krieger "this perfect combination of technical and product prowess" who understand the creative fields. "From very early on, Kevin really did have a feel for those communities and knew how to speak with them and knew how to foster a community in which they would really be excited to be a part of it."
Systrom spends most of his time at Instagram's office, meeting each Monday with Zuckerberg and other Facebook executives for companywide updates and regularly lunching with the leaders of other products, including Oculus CEO Brendan Iribe.
It's clear that Systrom, whose interest in fashion, expensive bourbon and a good meal is well documented, enjoys getting to know some of the app's most high-profile users. When Gomez visited the Facebook offices this year, he hosted a dinner at his home in her honor. Systrom's close friend Ryan Seacrest calls him "one of the most brilliant creative entrepreneurs of our generation."
It helps, too, that the entertainment industry has learned how to use Instagram for business purposes. Universal's recent campaign for the DVD release of Furious 7 had more than 1 million views, and the official Star Wars account has 5 million followers. Millions of followers can equal as much as six figures for a single sponsored post. It can drive tune-in, too, says Josh Spector, who oversees digital media at the Academy of Motion Picture Arts and Sciences, one of Instagram's largest entertainment partners. This year at the Oscars, the Academy posted first-look photos from the red carpet and behind the scenes of the winners backstage that Spector says were "every bit as important" as the broadcast itself. "It's a major component of what we do from the ground up."
Instagram has become crucial to the relevance of celebrities like Kim Kardashian, who uses the app to carefully dole out wedding pictures, baby photos and nearly nude selfies to her more than 75 million followers. "I'm not a singer, I'm not an actor, I'm kind of in the business of being me," she confides. "And that wouldn't exist without social media, especially Instagram."
Meanwhile, Instagram quietly has been building a sizable business of its own, widely introducing advertising last fall in more than 30 countries. The speed with which brands have flocked to the app — the number reached 200,000 by February — is why RBC Capital Markets analyst Mark Mahaney is calling Instagram the "story of 2016" for Facebook and why Credit Suisse projects the app will generate $3.2 billion in revenue this year (though there's talk that the number is closer to a still-impressive $1.5 billion).
It's hard to blame Systrom for taking his time with advertising. Already there have been some complaints that authentic posts are being lost amid the noise of ads for Taco Bell or Chase. "You can't please each and every one, but what you can do is communicate transparently to them, and what you can do is involve them in the process," he says. Systrom recalls learning this lesson after he decided to scrap the Gotham filter, which gave a moody quality to photos. "It was our least-used filter, so I thought, 'OK, great products get rid of things over time,' " he says, a smile playing at his lips. "People really liked it, it turned out."
Whatever thick skin he developed from that experience has been put to good use this year. Instagram risked a near revolt over its shift to a nonchronological timeline, which uses an algorithm to prioritize the photos it thinks users want to see. Even Kardashian is not a fan: "I want to look and, hopefully, see things in order," she says. And there have been other clashes. Comedian Chelsea Handler called Instagram "sexist" in 2014 after the app removed a topless photo she posted to parody Russia President Vladimir Putin's topless horseback ride. Systrom says the company's no-nudity policy is about creating "a safe place for just about everyone, including teens," but he acknowledges that they sometimes make mistakes.
He says violent videos of recent police shootings, which have reached wide audiences uncensored on Facebook and — to the extent they pop up there — Instagram, are "tricky territory" for the app. "We have a rule that says we don't show gore; we ensure that if anyone is celebrating anyone's death, that gets taken down as well," he says. "At the same time, we have a responsibility to make sure people have access to media and access to the moments that happen around the world." One thing Systrom says he's almost positive Instagram will never do is compete with Hollywood by producing content — but he catches himself before declaring that definitively. "Whenever I make statements like that, invariably I'm wrong," he notes. "I've learned my lesson to never say never, but our goal is not to be a content production company like Netflix. I think Netflix does an amazing job. I also think that longer-formed dramatic content … it's better suited for networks like that."
Instead, he's more interested in encouraging the next generation of entertainment icons — like top YouTuber PewDiePie. "If you sit down a giant group of teenagers and have them write the top three most influential people in the world, who do you think the top 10 are?" He answers his own question: "They're all video stars." A month later, Systrom will travel to Anaheim to meet with more than a dozen online video creators at the annual VidCon convention, marking the occasion with a Boomerang.
But even as Systrom eyes the future, here on this afternoon in May, a little piece of him still is rooted to the past. He scrolls through his Instagram feed as he ponders which of his own posts has meant the most to him. Finally, he settles on the obvious answer: his first one. This slightly askew shot — which has 55,000 likes — taken while on vacation in Mexico shows a stray dog next to the flip-flop-clad foot of his now wife and has become part of Instagram lore. "It kind of stands for what Instagram is," he says. "It's adventure, it's exploration but also familiar. And it has a dog in it. We were setting the tone for Instagram for the rest of the time."
This story first appeared in the July 22 issue of The Hollywood Reporter magazine. To receive the magazine, click here to subscribe.