I think people may be a little over-concerned or, in some cases, missing the point around the Instagram kerfuffle, but if you’re not familiar with the ad industry and where it’s going, I can see why. Maybe this will help.
FB & Instagram want to create “native ads” – ads that look and feel like they are a natural part of the user experience – instead of cramming standard square ads or banners into the app. Having worked at Silicon Valley social media company, I’m very familiar with how these companies think, and believe it or not, this comes from a very well-intentioned point of view: we want people to love using our products, but we need to make money, and most likely that’s going to come from advertising. Like most users (and unlike most traditional publishers) they HATE standard internet ads; they feel they degrade the user experience and look like crap on their beautiful products. They want to take a page out of Google’s book, which figured out a way to insert ads that actually fit really well with the Google experience, and in most cases add real value. In Twitter’s case, this means “Promoted Tweets” that appear similar to regular tweets in your stream. In FB’s case, this means ads that appear in your newsfeed and look similar to how people share content on FB, and maybe indicate that some people you know like that advertiser’s page or that brand. Facebook is getting paid for that, but they’re not going to share the revenue with the people mentioned in the ad – which I don’t disagree with.
Instagram is working on the same thing: how do we insert ads – since we need to make money somehow to pay for this technology that millions of people use for free – but make the ads feel like they actually belong, vs. something that appears to be a foreign object wedged into the page that interrupts or otherwise degrades the user experience? Well, let’s start with how our users actually use the product: they use it to share pictures in a very public way. So what if we created ad units that actually featured some of the photos that are being shared? Like an ad for Disneyland, that actually features some of the Disney pics your friends have shared, instead of stock photos? Or an ad for Tahoe that actually features some of the pics you and your friends have shared while there? Instagram is going to get paid to run those ads, and they need to make it clear that they’re not going to pass on any of those dollars to you, at least not directly – they’ll use them to continue to maintain the service that you’re using at no cost.
Could this get out of hand? Yes, but this approach has been happening on FB for a while now (“Your friend John likes Disneyland”), and the fact is it would be really stupid for an advertiser and/or Instagram to abuse this, since they’re ultimately doing this to get you to be a customer of the advertiser. I’ve seen advertisers do lots and lots of dumb things, and there will be dumb things they do with this (if Instagram proceeds despite the uprising), but I don’t think it’s as bad as people seem to think it is.