Why You Should Want to Pay for Software, Instagram Edition

If you want to stop social networking services from exploiting your likeness for advertising, you've got to start paying up.

PLEASE BUY THESE MARIACHEESEY CHIPS, said my Instagram of them.

Instagram is changing its terms of use in January. Included in the new legalese is one section that has some power users, including The New York Times' Nick Bilton, feeling queasy:

Some or all of the Service may be supported by advertising revenue. To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.

Note the key parenthetical -- "(along with any associated metadata)" -- which you could read as "location data." In essence, if you go to the Palms in Las Vegas and snap a pic... Facebook Instagram may use that photograph in an advertisement for the Palms that reaches your friends.

Not that any of this is all that surprising. It's a free service that's been focused on building user engagement, et cetera, in hopes of selling that engagement to advertisers.

Which reminds me of this wonderful mini-rant from Pinboard's Maciej Ceglowski, who identifies the key problem:

To avoid this problem, avoid mom-and-pop projects that don't take your money! You might call this the anti-free-software movement.

If every additional user is putting money in the developers' pockets, then you're less likely to see the site disappear overnight. If every new user is costing the developers money, and the site is really taking off, then get ready to read about those synergies.

To illustrate, I have prepared this handy chart:

	Free	Paid
Stagnant	losing money	making money
Growing	losing more money	making more money
Exploding	losing lots of money	making lots of money

Under these conditions, companies have to sell themselves because they do not have a sustainable business. And when they're sold, they either A) get shut down or B) become part of an advertising machine, like Facebook's. 

Truly, the only way to get around the privacy problems inherent in advertising-supported social networks is to pay for services that we value. It's amazing what power we gain in becoming paying customers instead of the product being sold. 

Here's an alternative version of what Instagram could have done before Facebook purchased them. Instagram has, what, 100 million users? If they got $5 a month from 20 million of those users, they'd be looking at $300 million in quarterly revenue. That's a nice chunk of change when you have a baker's dozen employees. You think those guys could split more than a billion dollars a year and call it good. Or hell, make the user numbers an order of magnitude smaller: 2 million out of 10 million users. That's still $30 million dollars a quarter for 13 guys.