Instagram photo app poised to capture iPhone 4S crowd

SAN FRANCISCO -- In just over a year, Instagram's photo-enhancing app for the iPhone has ranked as the top free photo app download on iTunes and has picked up over 10 million users.

Now, Apple's new iPhone 4S, with a souped-up camera, promises to boost its audience further.

"If there was one release of an iPhone that was tied to our trajectory, the iPhone 4S is definitely the one," says 27-year-old CEO and founder Kevin Systrom.

Instagram allows people to take pictures on iPhones and then process them in the app. The popular app has 15 filters that provide different effects and add colors and borders.

Systrom says the process can take "a ho-hum mobile photo and turn it into something gorgeous that you didn't know you could create."

Instagram is one of the "thousands" of photo apps populating the iTunes App Store, fueled by the massive use of iPhone cameras, according to Altimeter Group analyst Chris Silva.

Researcher Gartner forecasts 468 million smartphones will be sold worldwide this year, a number that will climb to 1 billion in 2014.

The iPhone is the most popular smartphone, with more than 128 million sold. And Apple has reported that more than 4 million iPhone 4S models, which boast a new 8-megapixel camera, have sold since they went on sale Friday.

Google's Android, however, is the most popular smartphone operating system. Instagram is working on an Android app to launch next.

Instagram has emerged as the top choice for photo apps because it's free and the company has built up a community of users, who can share photos on Facebook and Twitter, says Silva.

Rivals Hipstamatic and Camera Plus, which offer similar tools, charge for their services.

"Most of the apps were just focused on the photo," Silva says. "The ability to share them in an active social network really helped their case."

Ruth Bazinet, an Instagram user from Rhode Island, says the app allows her to peer through the artistic lenses of people from all over the world.

"Instagram is a quick snapshot," says Bazinet. "And I feel very briefly swept up in another person's moment — whether I know them well or not. I haven't really felt that yet from similar photo apps."

Yahoo's Flickr long had a reputation as the coolest photo site, before the iPhone era. Flickr was the place for millions around the world to share their photos, discuss them and meet like-minded people.

"Instagram is the new Flickr," says Eileen Gittins, CEO of Blurb, a self-publishing book service.

"Flickr was about publishing and sharing a photo. Instagram takes it a step further," by sharing photos and altering them instantly on the phone, she says.

Hoping to profit from Instagram's popularity, Gittins began offering the ability to make books out of Instagram photos in July. That has resulted in uploads of 650,000 images from Instagram for books.

Gittins says Instagram photos have replaced all other forms of photo uploads to be her No. 1 source of photos.

"It's gone shockingly well," she says.

Despite the enormous use of Instagram, just six people, including CEO Systrom, work at its San Francisco headquarters, a small office that housed Twitter before that social network moved to bigger digs.

Systrom and fellow Instagram co-founder Mike Krieger, 26, met as engineering students at Stanford University.

Systrom went to Google after graduation, while Krieger was hired by social network Meebo. Three years later they decided to create an app, a check-in service called Burbn.

In the private beta, the founders saw their friends spending more time sharing photos than checking in.

So they switched gears to raise $7 million in funding from Benchmark Capital, Twitter co-founder Jack Dorsey and Lowercase Capital.

In October 2010, Instagram was born. Instagram was an instant hit as 25,000 signed up the first day.

Now, the big question for Systrom and his investors is how to make money from Instagram.

The app and service are free. The company plans to keep the app free.

But it eventually will begin charging for products, Systrom says.

That's something that's clicked for rivals, Silva says.