Facebook shares dropped almost 3% in premarket trading on Tuesday after the co-founders of Instagram, the company's fast-growing photo-sharing app, decided to leave Facebook under mysterious circumstances amid alleged clashes with CEO Mark Zuckerberg, deepening an executive exodus that has intensified over the past six months as Facebook struggled with accusations of Russian interference and the rolling fallout of the Cambridge Analytica scandal.
According to the Financial Times, Instagram founders Kevin Systrom and Mike Krieger are leaving the photo-sharing app that they sold to Facebook for $1 billion back in 2012. With the departure of Systrom and Krieger, the founders of Facebook's biggest acquisitions have now left the company.
Their departure comes less than six months after WhatsApp’s founders Jan Koum and Brian Acton quit the US social media group, after clashing with Facebook chief executive Mark Zuckerberg over privacy and data protection in the wake of the Cambridge Analytica scandal.
Including the departure of Oculus VR co-founder Palmer Luckey 18 months ago, the founders of Facebook’s three biggest acquisitions have now all left the company.
Bloomberg provides some context to the departure, reporting that Systrom and Krieger had been able to keep the brand and product independent while relying on Facebook’s infrastructure and resources to grow. But lately, "they grew frustrated with an uptick in day-to-day involvement by Zuckerberg, who has become more reliant on Instagram in planning for Facebook’s future."
The departure of Systrom and Krieger follows several high-profile executive departures at Facebook, including that of Chief Security Officer Alex Stamos, who famously suggested that the company was pressured into finding "evidence" pointing to Russia's purported interference in the 2016 election, and Product Chief Chris Cox, who was put in charge of the “family of apps” that includes Instagram, WhatsApp, Messenger and Facebook.
Systrom said in a blog post that the two men are "grateful for the last eight years" and the opportunity to grow the team from "13 people to more than a thousand". He added that the two men would be taking some time off before their next venture.
Mike and I are grateful for the last eight years at Instagram and six years with the Facebook team. We’ve grown from 13 people to over a thousand with offices around the world, all while building products used and loved by a community of over one billion. We’re now ready for our next chapter.
We’re planning on taking some time off to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.
We remain excited for the future of Instagram and Facebook in the coming years as we transition from leaders to two users in a billion. We look forward to watching what these innovative and extraordinary companies do next.
As one VC said, the two founders leaving Instagram is "a real moment".
Shortly after Facebook bought the app for roughly $1 billion, its rapid user growth sent its valuation to $100 billion, according to Bloomberg intelligence.
The deal immediately turned Mr. Systrom and Mr. Krieger into millionaires many times over.
Instagram has since been valued at 100 times that $1 billion acquisition price by Bloomberg Intelligence, a sizable return on investment on paper.
And Zuckerberg followed up his Instagram buy with the $19 billion purchase of Whatsapp, according to the NYT.
Facebook went on to purchase Parse, a service that provided tools for mobile developers, and Oculus, a virtual reality hardware start-up, branching into new areas beyond the original social network. Mr. Zuckerberg also spent $19 billion to buy WhatsApp.
While Instagram was relatively scandal-free when compared with Facebook's main product and its other apps, their departure raises questions about a possible falling-out with Zuckerberg. To wit, six months earlier, WhatsApp founders Jan Koum and Brian Acton quit after reportedly clashing with Zuckerberg over privacy issues.
What's more, the departures of Systrom and Krieger followed the departure of Marne Levine, who was previously Instagram’s chief operating officer and left her role at Instagram earlier this month to return to Facebook and lead partnerships. All of this begs the question: Who will lead Instagram during the coming months and years, which are bound to be a crucial time for Facebook and its portfolio of apps.