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Comment by iambateman | Hacker News Reader

There is no problem with a service monetizing. It's a great day when a service like Instagram is finally sustainable and relies on customers, not VCs.

But they had three years to think about monetization, and the BEST plan they came up with was advertising. Not freemium, or selling products, or any other business model.

Advertising.

TV advertising "started out slow" too. Now it's 1/3 of the viewing experience. With ads, you never, ever, get fewer ads. It's always more. More annoying, more intrusive, on a good day just more "targeted."

Of course, we've seen ads coming to instagram for years. The good people at Facebook somehow managed to reinvent the way everyone interacts, but can't find a way to make money directly from the people who use their service.

TL;DR...Monetizing isn't bad. But advertising is unimaginative.

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Monetizing isn't bad. But advertising is unimaginative.

Ads is not an easy business. You have two sets of customers, i.e. users and marketers. Striking a balance between the needs of both of these sets is always a key. Also, you need to build necessary technology like ad servers, bidding tools, reporting & analytics etc. "Ads" are a product too. And building a great product takes time.

> But they had three years to think about monetization, and the BEST plan they came up with was advertising. Not freemium, or selling products, or any other business model.

Instagram is for-profit company and if their ARPU via advertising is significantly greater than other options then it's in their stockholders (currently FB and public markets) interest to go via advertising route. I'm sure they must have considered all the options internally. But reality is very few people are willing to pay for online products.

IOW, a race to the bottom. Lowest common-denominator business.

I'm genuinely interested in alternatives to advertizing - what would you suggest?

This is definitely the largest problem for social media companies in my mind. No matter what they do to generate revenue they will be vilified by the average user. Nobody wants to pay for anything so the natural course of action is to use ads, then everyone complains about ads and leaves or uses the service less. The other course of action is to sell data about users, but that will piss off users even worse.

One alternative I can think of that would not drive away users would be to charge the largest companies that use the services to promote their products. Perhaps charge Oreo for the right to make posts to their social media account on Facebook or Instagram.

I am not an instagram user, but I would venture giving users options might be a viable alternative. Let them choose between $10 a year or different ad variants.

Why doesn't Facebook just charge every user $1 per month to have an account? Want less of this or more of that, you can pay more - but a base fee of $1/month seems reasonable.

I believe Facebook's ARPU is about $10/year.

So even $1 or $2/month would make a big big difference.

I guess the logic is Metcalfe's law means keep the barrier to entry low.

Metcalfe aside, it's probably 10000% easier to raise ad rates than it is subscription rates. Plus, subscriptions will invert their customer model and give users power that they likely would rather not give away.

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