The problem that instagram solved was picture sharing between users. This happens to be a major sticky service for facebook. Not only how easy it is to share to all your friends but also your pictures being stored. If instagram was allowed to continue the way it was facebook would have lost a major sticky service. Sharing pictures and picture storage.
Look at what twitter did just by copying their status update (limited character length as well)
Look at what twitter did just by copying their status update (limited character length as well)