Instagram began development in San Francisco, United States, when Systrom and Brazilian Krieger chose to focus their multi-featured HTML5 check-in project, Burbn, on mobile photography. The name "Instagram" is a portmanteau of "instant camera" and "telegram."
On March 5, 2010, Systrom closed a US$500,000 seed funding round with Baseline Ventures and Andreessen Horowitz while working on Burbn.[18] Josh Riedel then joined the company as Community Manager. Shayne Sweeney joined in November 2010 as an engineer and Jessica Zollman was hired as a Community Evangelist in August 2011.
In January 2011, Instagram added hashtags to help users discover both photographs and each other. Instagram encourages users to make tags both specific and relevant, rather than tagging generic words like "photo," to make photographs stand out and to attract like-minded Instagram users. In September, version 2.0 went live in the App Store (iOS) and included new and live filters, instant tilt–shift, high resolution photographs, optional borders, one click rotation, and an updated icon. On February 2, 2011, an announcement revealed that Instagram had raised US$7 million in Series A funding from a variety of investors, including Benchmark Capital, Jack Dorsey, Chris Sacca (through Capital fund), and Adam D'Angelo. The deal valued Instagram at around $25 million.
On April 3, 2012, Instagram was released for Android phones running the 2.2 Froyo version of the OS, and it was downloaded more than one million times in less than one day. That same week, Instagram raised US$50 million from venture capitalists for a share of the company; the process valued Instagram at US$500 million. Over the next three months, Instagram was rated more than one million times on Google Play and was the fifth app to ever reach one million ratings on Google Play—as of April 2013, it had been rated nearly four million times.
As part of its second largest acquisition deal to date, Facebook made an offer to purchase Instagram, along with its 13 employees, for approximately US$1 billion in cash and stock in April 2012, with a plan to keep the company independently managed. Britain's Office of Fair Trading approved the deal on August 14, 2012, and on August 22, 2012, the Federal Trade Commission in the U.S. closed its investigation, allowing the deal to proceed. On September 6, 2012, the deal between Instagram and Facebook was officially closed.
On April 12, 2012, Facebook acquired Instagram for approximately US$1 billion in cash and stock. The deal, which was made just prior to Facebook's scheduled IPO, cost about a quarter of Facebook's cash-on-hand, according to figures documented at the end of 2011. The deal was for a company characterized as having "lots of buzz but nobusiness model," and the price was contrasted with the US$35 million Yahoo! paid for Flickr in 2005, a website that has since become among the 50 most popular in the world.
Mark Zuckerberg noted that Facebook was "committed to building and growing Instagram independently", in contrast to its past practice. According to multiple reports, the deal netted Systrom US$400 million based on his ownership stake in the business. The exact purchase price was US$300 million in cash and 23 million shares of stock.
On December 17, 2012, Instagram updated its Terms of Service, granting itself the right—starting on January 16, 2013—to sell users' photos to third parties without notification or compensation. The criticism from privacy advocates, consumers, the National Geographic Society, and celebritis like Kim Kardashian prompted Instagram to issue a statement retracting the controversial terms; regardless, the issue resulted in the loss of a portion of Instagram's user-base, as former users switched to other Instagram-like services, such as Pheed, a multi-media social sharing platform launched in November 2012 that gained more new users than any other app in the U.S. the week that Instagram changed its terms of service. Flickr was another service that gained many new users following the announcement—prior to the changes, Yahoo released a new Flickr mobile app for iOS, with built-in vintage filters, to rival Instagram. Yahoo also offered a limited period trial version of Flickr Pro to its users. Instagram subsequently began work on the development of a new language to replace the disputed terms of use.
In January 2013, it was confirmed that Instagram has asked for photo identification as a form of verification due to unspecified violations.
Following the appointment of Emily White to the position of chief operating officer in March 2013, White stated in September 2013 that the company should be ready to begin selling advertising by September 2014 as a way to generate business from a popular entity that had not yet created profit for its parent company. In September 2013, Instagram reaffirmed its commitment to free and open access to its smart-phone app for users. During an interview with Women's Wear Daily (WWD), White cited "the sophistication of cameras on smartphones as one reason for ushering in the transformative change," and she used her observation of the replacement of large cameras with mobile smartphones during a fashion show as an example. On October 3, 2013, Instagram announced that it would be adding advertising to its platform.
On October 22, 2013, during the Nokia World event, held at Abu Dhabi, United Arab Emirates (UAE), Systrom confirmed the impending release of the official Instagram app for the Windows Phone. On November 21, 2013, the official Instagram Beta for Windows Phone was released to Windows Phone 8 to allow Windows Phone users faster access to Instagram services; although, at the time of release, the app was still under development.
Instagram introduced sponsored post advertising targeting US users in November 2013, and UK users in September 2014.
On December 12, 2013, Instagram added Direct, a feature that allows users to send photos to specific people directly from the app. Instagram's primary intention with the Direct feature is to compete against messaging services, including Snapchat.
On March 11, 2014, Instagram released an updated Android app with performance improvements and a flatter interface. The update was primarily intended to reduce the app's file size and resource usage, and it was optimized for and tested on low-end smartphones sold in emerging markets, such as the Samsung Galaxy Y, which was popular in Brazilat the time.
The company's Global Head of Business and Brand Development—a new position for Instagram—was announced in mid-August 2014. Facebook's former Regional Director James Quarles was assigned the role, which manages Instagram’s revenue strategy, in addition to both the marketing and sales teams. Quarles will report directly to Systrom during a tenure in which he will develop new “monetization products,” as explained by a company representative to the media.
Since the app's launch it had used the Foursquare API to provide named location tagging. In early 2014, after being purchased by Facebook, the company was switched to usingFacebook Places.
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