I've come to realize that the distinction between enterprise and consumer is trivial. There is one basic rule for all businsses: solve a problem that is important to someone. Wanting your phone's pictures to look better turns out to be a valuable problem for many people. One nice thing about the enterprise space is that there is a tradition of paying for things of value. But instagram's lack of paying users does not imply a lack of value being added. And there's almost always a way to monetize a product that is important to someone.
Perhaps a more direct message from this article could have been: "Just because you target consumers doesn't mean you can avoid solving an important problem". Consumer products fail for the same reason enterprise ones do: their products are not important to anyone.
> But instagram's lack of paying users does not imply a lack of value being added. And there's almost always a way to monetize a product that is important to someone.
Whoa, hang on a sec there. Do you really believe that is true? If it is, then why couldn't Instagram make money from the app itself? If they could, why didn't they?
I'm pretty sure that if I bake cookies and go hand them out, people will take them. Knowing that people will consume my cookies in large quantities if I give them away is a long way from creating a successful, sustainable business out of the popularity of my free cookies. I'm sure my cookies are important to the people to whom I am giving them, but does that mean that I can monetize my free cookies in ways other than charging for the cookies? I doubt it. But let's be honest, that's exactly what we're talking about here- giving away a useful service with the assumption that I can make money by doing something else related to the service in the future. I still don't understand why these economics apply to internet companies and not more traditional companies, but I guess I am just old-fashioned.
Instagram is a media company. They're only just now reaching a size where their audience is big enough for advertisers to care.
It's not just Internet companies that do this - practically all media start out in the red and don't make money for at least a couple of years. CNN, as an old media example, basically gave away advertising for its first several years of existence.
But that's not what happened here. Instagram, to my knowledge, has never made a penny off of advertising. There is no clear business model. Maybe it's advertising. Maybe it's charging for additional filters. Nobody really knows, not the Instagram founders and not Facebook executives.
How does anybody know whether a business would pay for advertising on a photo sharing app? People are always talking about "just turning on the profit spigot" whenever you want. I don't see any evidence that it is that easy.
Aside (maybe off-topic): "...solve a problem that is important to someone. Wanting your phone's pictures to look better turns out to be a valuable problem for many people."
I'd agree with the first part but not really for the second.
You either have to solve a problem, or make something that's fun. Nail either of those and you've probably got something worthwhile. In this case I'd put Instagram in the latter category.
"And there's almost always a way to monetize a product that is important to someone."
There's almost always a way to monetize a product that is both important to someone, and difficult to reproduce. If Instagram ever started charging for their service, a newer, "hipper", freer Instagram clone would have popped up overnight and it would have gained a lot of traction just by being free.
Of course, there are other ways to monetize a service other than directly charging a user, but given the nature of what Instagram is, most of the usual suspects (targeting ads and collecting user data, etc) are potentially much creepier than usual.
The real takeaway here is that if you don't have a service or product that people would pay for, you should shoot for user growth and cash out when you can.
Perhaps a more direct message from this article could have been: "Just because you target consumers doesn't mean you can avoid solving an important problem". Consumer products fail for the same reason enterprise ones do: their products are not important to anyone.