I could build Instagram in a week.
How many times have you heard someone say “I could build [insert hot startup name here] in a week”? I hear it all the time. But, I have yet to see one of these delusional wizards actually do it. They are obviously too busy inventing the next big thing. They fail to realize that building a successful consumer web or mobile product takes more than great technology. A lot more.
Success looks easy from a distance. Technology seems simple if the design is great. Attracting great founders and early employees just means rounding up some of your friends. Raising money is always easy, right? Getting great press stories just takes a few emails. Attracting influential users just sort of happens. Viral growth is a simple formula. Solving a problem that millions of people care about is just luck. Going public or getting acquired is automatic. There are hundreds of critical decisions along the way. None of them are easy.
From a technical point of view there isn’t much difference between Instagram, Path, Oink, Hipster, or a bunch of other companies that all do essentially the same things. Mobile, social, photo apps that include comments and some type of friend/follow model. Why is one worth $1 billion and another shut down with no value? It isn’t about the technology or how long it took to build.
First Mover Advantage is real. The first product on the market has a big advantage…if the product actually works. People get used to the product, get to like the user experience, and develop a user community culture. Users invite their friends and the viral growth cycle starts.
Network effects are the value in social products. Once the user community starts viral growth they are not likely to switch to another product…even if it is better. A competing product with a few new features, or something that is faster or cheaper, isn’t likely to steal away many users.
Design and user experience matters, especially with consumer products. Timing and luck play a big part in success. Technology can be replicated, timing and luck can’t.
Facebook definitely has the engineering talents to build a mobile product with features similar to Instagram. But it wouldn’t be Instagram. It would be an obscure feature buried somewhere inside the Facebook app that would only work within Facebook. Instagram is magical because it does one thing really well. It stands alone, and is quick and easy to use. It isn’t bogged down with the overhead of a much larger app or service. Instagram photos can be shared across lots of different social services. If Facebook engineers designed a mobile photo sharing app would it work like this? No.
Mobile is the future, and photos are core to Facebook. Instagram does both better than Facebook. Being the leader in two growing trends is critical to Facebook. That is why Instagram is worth more than $1 billion to Facebook.
Google Video is another example. Google already had a video hosting and sharing service called Google Video…but it wasn’t YouTube. Even though the features were similar, the user experience, and more importantly, the user community, were very different. The technical features could be replicated, the brand and user community could not.
Web video, and search for that video, is a huge trend. YouTube was the clear leader. Whoever owned YouTube would instantly become the leader. That was worth $1.6 billion to Google…even though they already had comparable features in Google Video.
Next time some wizard tells you they could build XYZ hot startup in a week, just smile and say “You probably could build the features…but you couldn’t build the user community or the company. That is where the value is.”
I wrote this several years ago when Facebook acquired Instagram for about $1 billion. That seemed like an outrageous amount at the time. Since then SnapChat and WhatsApp valuations make Instagram look like a screaming buy.
Remember that the value of an acquisition depends on what the acquiring company can do with it. And that value can be radically different for one acquirer versus another.
This post originally appeared on Linkedin.