Instagram, Business Models, and Expectations

Instagram has been in the news a lot lately, as the service just launched an Android app. However, this video has left many people concerned about Instagram's future:

When Sarah Lacy asks about a business model, Instagram CEO Kevin Systrom responds that ~30 million users are not enough to monetize and they plan to build a tool that makes it easier for advertisers to post to the service.

Seems kind of crazy to me. I think the free plus ads "business model" is a difficult way to go, especially when it's bolted on after the fact. Sometimes I feel like that strategy is only a delay to keep investors at bay until you are bought by someone like Google, Facebook, or Apple.

But I guess what it comes down to is this: Would you pay for a service like Instagram? Or Facebook? Or Twitter? I would if there was something of value.

And remember:

“If you are not paying for it, you’re not the customer; you’re the product being sold.” - Andrew Lewis

How about this for Instagram: $12 (or maybe even $24) per year for a Pro account that gives an unlimited archive of your photos with and without filter, the ability to download/export your photos at any time, access to the Pro API that allows other camera apps to post images to your archive. Basically what Flickr should have been... (speaking of which, RIP Flickr?)

Not to mention other options I've regularly seen around the web:

  • charge for higher quality filters
  • allow users to sell/license photos and take a cut of the transaction
  • simply charge for the app

On a more macro level, it brings into question the whole venture capital route: do you take investors, who have expectations of huge revenue growth toward an IPO or huge user growth with hopes of winning the Google/Facebook/Apple lottery? Or do you try to build a smaller, sustainable business on your own (like 37signals or Instapaper) doing something you like that will last a reasonably long time?

Do you think Instagram, Facebook, or Twitter would be thought of as successful if they charged for their app or service? Or even tried to make money in ways that weren't free plus ads?

I'd say yes. Maybe not 30 million users that Instagram currently has, but is 30 million customers paying nothing better than say 5 or 10 million of those paying for a Pro account? I think I would rather have a smaller number of paying customers than 30 million and no business model.

I know I simplified the above scenarios to make a point, but I think it comes down to expectations and having enough, as I wrote about the other day. I know there is serious temptation to build for the lottery, but I think our economy (and the web) would be better off if more people were building for the long term.

Author: Jason

I am a patient boy.