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Instagram Could Make Money. Should it?

iPhone photo-sharing service Instagram is just 8-months-old and already has 5 million users. But revenue is almost zero. Such a start-up could monetize its success, but should it?

What’s the Latest Development?

How does a successful start-up translate popularity into profit? And should it try to? These are some options but all have pros and cons: Charge for “pro” or “premium” features, either as one-time sales or subscriptions; display advertising or sponsored photos; charge developers to use its APIs; charge consumers to download the Instagram app or use the service. “While this is a nice academic exercise, it’s probably not going to matter much in the short- to medium-term. Whether or not Instagram can and will become a big business isn’t really the point right now.”

What’s the Big Idea?

Focus on growth first and revenue later—that’s today’s startup model. Instagram won’t have problems raising more venture capital, so it doesn’t actually have to focus on making money right now, says Dan Frommer. “Heck, there’s a good chance that Instagram will never have to figure out a way to make money. It’s the kind of fast-growing social network that many big Internet companies would love to own. Instagram’s founders could see huge paydays before the company ever makes a dime, and that would be a big victory for everyone involved.”


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