Instagram needs to sell its users somehow—they just did it all wrong


(Photo: Karly Domb Sadof/AP)

“If you’re not paying for a product, chances are good you are the product.” That’s what Maxime Gagne, a games industry lawyer, told an audience at the Montreal International Games Summit last year. Tuesday’s Instagram brouhaha couldn’t have made those words ring any truer.

In case you missed it, the photo-filter-cum-social-network announced changes to its terms of service that would allow advertisers to incorporate user-created photos. Outrage from users was predictable, with many taking to “free” social networks—including Instagram-owner Facebook—to express their frustrations and vows to never again use the service.

Taken aback by the vocal response, Instagram quickly apologized to users and said it would replace the offending language with something clearer and more palatable.

But should there have been outrage at all, given the above truism?

As cheap as it can be to run a service over the Internet, there are always associated costs and someone eventually has to pay the freight—especially after paying a billion dollars to acquire said service, as Facebook did for Instagram earlier this year.

Sometimes balancing the provision of a cool service with the need to make money is done ingeniously, as Google did when it built a huge business out of serving up non-intrusive ads in exchange for organizing the web. Sometimes it’s done clumsily, as Facebook has done with similar advertising deals that border on privacy violations. Indeed, Facebook’s own co-opting of users’ photos into ads is among the creepiest things any major company has done online.

Instagram, unfortunately, couldn’t have picked a worse way to monetize its popularity. Google in particular took years to figure out how it could make money, and it did so smartly, first by studying how people used its service, then designing a system around it that could pull in revenue without ticking them off.

Instagram, which was founded only two years ago, decided to forgo that longer study-to-innovation cycle and instead went for the quick and simple buck, or at least it did before sharply backpedaling. It’s no wonder people were upset, since there’s nothing innovative about letting advertisers use subscribers’ stuff for their own purposes. It’s the easy way out.

But users being the product isn’t the only implicit truism that has emerged in the age of Internet services. Another factor is a new sort of social contract, where users—if they aren’t aware that they are the product—do implicitly expect that the companies behind new services will find a way to make money without having to resort to blatantly selling them out.

Instagram has learned that the hard way. If the lesson really did sink in, its owners will go back to the drawing board and come up with some other way to monetize the service’s popularity.