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 (and sometimes exceed) privacy violations. Indeed, Facebook’s own co-opting of users’ photos into ads is among the creepiest things anyone has ever 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.