Instaprofit-A Solution to the Facebook/Instagram Problem
- Posted by Jeff Carter
- on December 20th, 2012
Instagram wants to sell my photos. Facebook ($FB) wants to commercialize my relationships. Nothing is free, there are opportunity costs to everything. However, the recent decision of Instagram/Facebook to monetize photos has received tremendous backlash.
Their executives focused on an accounting/finance based solution to their problem rather than a economics based one.
They looked at their costs and thought, “How can we monetize the data we have?”. Answer, “Sell it.”. That was a monolithic way to look at things. It was centrally planned.
Instead they should have thought in a more market based Coaseian manner which would have created cost/opportunity cost decision trees to be formed among its users. What if instead Facebook/Instagram said, “We would like permission to sell your photos to potential advertisers. In return for that, if an advertiser chooses to buy one of your photos, we will revenue share with you.”
What would the result be?
Some users would delete their Facebook/Instagram. Some wouldn’t care. But, many users would begin to stage photos that could potentially be bought by advertisers. Facebook/Instagram would be inundated with photos and advertisers would have many more to choose from. As soon as there is a clear economic benefit to taking a photo, more photos would be taken.
I’d encourage Facebook/Instagram to pull back from their policy, and rethink it. Figure out the operations behind revenue sharing-and give up a decent percentage of profit to their users. They can charge a fee, like a PayPal ($EBAY) for payment processing-or all of a sudden open up a Facebook bank like Paypal. Eventually it could provide a platform for Facebook to create other micro markets, targeting potential buyers and sellers with the microdata it has accumulated.
They need to think more economically, not on accounting terms. Facebook could use this as a real opportunity to make themselves even more stickier. When people actually could make passive money by being a Facebook user, who wouldn’t sign up?
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
Jeffrey Carter is an angel investor and independent trader. He specializes in turning concepts into profits. He co-founded Hyde Park Angels one of the most active angel groups in the United States in April of 2007. He previously served on the Chicago Mercantile Exchange Board of Directors. He has done market commentary for (More...)