The Photo App Facebook Didn't Buy: Hipstamatic

Facebook may not have paid $1 billion for the Hipstamatic photo app this week, but it has had a profitable business model for years.

Before Instagram ever existed, Hipstamatic brought retro digital photos to iPhones everywhere. 

The Hipstamatic app, which lets users choose retro filters for photos, has been popular since it launched in 2009. It now boasts 4 million users and is used by high-profile photographers, including award-winning New York Times-photographer Damon Winter. The app won Apple's App of the Year in 2010 and has gotten rave reviews from the tech community.

So why, one might wonder, did Facebook pay $1 billion to buy Instagram rather than, say, Hipstamatic? While Instagram has focused on social photo sharing and rapidly grown its subscriber base to more than 30 million people, Hipstamatic has taken a different tack. 

Founders Lucas Buick and Ryan Dorshorst position the app as primarily a digital image alteration tool, and openly distinguish it from Instagram because they steered away from a social network business from the start.

Hipstamatic is also a paid photo app. Thanks to a $1.99 download fee, and options to buy premium lenses and filters within the app, it has been profitable since its second week in operation. It reportedly raked in $10 million in revenue last year. Today, it's also one of the only mobile apps outside of games to make a significant profit from in-app sales.

And rather than fret over Facebook's acquisition of Instagram, Buick sets his sights on acquiring a traditional photo concern like Eastman Kodak (which filed for bankruptcy protection in January).

The Hipstamatic story begins in early 2009, when the two were the owners of a flailing design studio. Over the course of a year, they had watched their client list dwindle to its lowest number ever. They were seriously considering closing the doors for good. But then they had an idea. 

"We needed a new way to make money. So we thought, 'What can we make with two guys and no money?' The answer was an iPhone app," Buick recalls.

For Buick and Dorshorst, creating a free app, however enticing, wasn't an option. The financial world had come to a screeching halt in 2009. "We watched our own clients go out and try to raise money, and they just couldn't," he says. Both also had bills to pay, both personal and expenses from their failing design business.

"Yeah, we were doing it for money, but we are also deeply passionate about this product," adds Buick. The founders both have always had a love for retro aesthetics—old cameras, print ads from the 1950's, and AMC's Mad Men.

When the app hit the Apple store in December 2009, its success was immediate. In the first 36 hours, it was the most downloaded app in Japan. "As a designer, to have anything of mine be a hit in Japan was like a childhood dream," says Buick.

By the two week mark, Hipstamatic was making money. "In the first 10 days our sales doubled," says Buick. "We saw $50, then $100, then $300, and soon we were making thousands a day. The growth was very quick."

Once the app became the business, the guys shut down their design studio and focused only on the app. When the company moved its office from Chicago to San Francisco in 2010, the founders paid cash for a semi-run down space that stole their hearts. Hipstamatic offers its 16 employees real salaries and health benefits. 

To date, Hipstamatic has not raised any money. "The VC money has certainly come around," says Buick. "But we don't need money, and more importantly, we don't want bosses. I've never been in a board meeting. My board meetings are over cocktails."

His bar-side board meetings have led the company to some buzzworthy ventures. Last month, Hipstamatic made headlines when it inked a content sharing deal with Instagram (which continues post Facebook acquisition). Though painted as competitors, Buick and Instagram CEO Kevin Systrom have also been friends for years.

"We found that our users were posting more and more to Instagram, so it was very natural. Now it's a pretty seamless process to post your photos directly from Hipstamatic to Instagram," says Buick. "Anything we can do to help grow this new wave of photographers is great for everyone."

That doesn't that mean they have small ambitions.

"We want to redefine photography," says Buick. "Someone asked me once, 'If Kodak offered to buy Hipstamatic, would we sell?' I say, 'No.' I want to buy Kodak. If we had the money in 2010, I would have bought Instagram. But that's besides the point. Our goal is simple: Inspire people to take more images." 

Apr 12, 2012