Instagram changed their Terms of Service. Should you freak out and delete your account? Take the learned helplessness approach? Retreat into nostalgia for the older, supposedly better web? Just struggle to try to understand what the hell is actually going on in the first place? 

Here’s a thought experiment about what, if anything, you really value about Instagram. What if someone cloned it and charged you to use it? 

That sounds like heresy. Social networks, mobile apps, and the web business itself aren’t supposed to work like that. Building a product and asking customers to pay for it isn’t innovative, disruptive, or interesting from a technology or user experience perspective. 

Actually it is all of those things. 

App.net is doing exactly that for social networking. Its founder, Dalton Caldwell, was fed up when Twitter kept trying to “monetize” its user base in user-hostile ways. So he cloned Twitter and asked users to pay for it. Unsurprisingly, it has a lot less users. But the users seem happy and the network is growing. Why? Because they’re getting what they paid for. And therefore, they (or their content, or their privacy, or their activity) do not have to be sold.

This cuts through all the punditry and handwringing that goes along with every privacy-violation/monetization move from our free digital tools. Caldwell knows that money talks. Anil Dash may not like it, but Twitter, Facebook, and Instagram make these distasteful monetization moves because there are understandable businesses there. (Maybe not long-term sustainable ones, but ones that can bring revenue in without causing such a user exodus that the service collapses. Do you see Facebook or Twitter collapsing?) Caldwell has actually built an alternative that runs not on good will and utopian philosophy, but on the same thing that runs the distasteful alternatives: money. 

(Note: I asked Dalton Caldwell for a quick comment about how sustainable App.net already is or will be in the near future. I will update the post if and when he replies. [He has–see update at the bottom of this post.] In the meantime, suffice it to say that App.net did accept venture capital from Andreesen+Horowitz, which was then augmented by a Kickstarter campaign and “approximately 20,000 sign-ups since then”, according to an App.net spokesperson. The point is that App.net started with a business model that doesn’t kick the can down the road to some foggy point at which it must magically “monetize” its user base, like Instagram.) 

So here’s the real question: how much is it worth to you, as an Instagram user, to not be sold? The rest is noise. 

I don’t mean that discussions about privacy, advertising, evolving social norms, and everything else that Instagram’s announcement has elicited are pointless. What I mean is that we can start to answer these thorny questions in reality by building alternatives and seeing how they actually fare. App.net has shown it can be done: literally, nothing more complicated than “clone it, charge for it.” Will it work? That remains to be seen, but it shows a willingness to break outside of conventional wisdom about “what’s possible” and, more importantly, test the idea in the real world instead of in an angry blog post.

Instagram has handed some technologist/entrepreneur an opportunity to provide lost value to whatever chunk of Instagram’s user base flees the service (or might, if there were an attractive alternative). This chunk probably won’t be enough to sink Instagram or replace it, like Facebook did to MySpace. But it may be big enough to build an entirely different business on, based on a process that doesn’t necessarily need massive scale or network effects to function sustainably: exchanging money for services. 

Again: how much is it worth to you, as an Instagram user, to not be sold? The answer may well be “nothing.” That’s OK. Keep using it then. Or delete your account. The world will not stop turning. But this doesn’t have to be a binary choice. Heck, we could try inventing a brand new web protocol just for social networking. Maybe that will work! It’ll take ubiquitous adoption just to make any sense, but you never know. Or there might be a simpler way. 

Clone Instagram. (Not just the filters, not just the social, and not folding it as a “new feature” into something that already exists.) Charge a fee. (Make your TOS, and its freedom from advertising-related privacy tradeoffs, clear.) See what happens. Maybe Hipstamatic wants to try this. Maybe Flickr will. (Not likely, but what the hell.) Or maybe someone new just wants to enter with a clean slate, a la App.net, and do it themselves. 

Is it that simple? It can’t be! But until someone dares to actually find out, we’ll never know. 

Update:

App.net founder Dalton Caldwell got back to me. I asked him: “Is the system working– are you taking in enough revenue from your much-smaller-but-paying-customer-base to finance the ongoing operation of your business?” 

He said: “Yes, the system is working. It all comes down to what your metrics of success are. If you define success as ‘sustainable’ we are in good shape. If the definition of success is to have 200MM users, then it’s hard to make sense of App.net.

“We are trying to balance profitability with investing revenue back into the App.net ecosystem through a few different mechanisms. For instance, we dropped prices by 40% in October and also added the “Developer Incentive Program” which pays out 20K per month to the app developers which build apps which make people happy (http://blog.app.net/2012/09/27/announcing-the-app-net-developer-incentive-program/) I have consistently stated that we want to continue to make App.net cheap/accesible as possible as our economies of scale grow. Depending on how we project growth, renewal rates and future price drops etc. we are somewhere between already profitable and having runway on the order of years without needing additional capital.”