Instagram, Twitter and boiling frogs

You’ve probably come across the frog-in-boiling-water analogy. Put a frog in a pan of boiling water and it’ll immediately jump out. But put the frog in cold water and gradually heat it to boiling point and it’ll stay in the water and die.*

It’s a useful analogy in economics, where it’s often assumed that it’s far more sensible to notch prices up gradually than to crank them up in one big jolt, so that consumers/frogs stay in the water that bit longer. And it strikes me it’s also applicable to the impending social media crisis I’ve written about over the past year.

Many of today’s new social media services work on the basis of putting the frog in cold water (giving away your product for free) and gradually heating it up (squeezing money out of consumers) over time.

And that’s basically the business model of companies like Twitter and Instagram, a model the professors at MIT were obsessed with when I spent some time at the business school there last year. Here’s how it works: you lure users into your services in terrific numbers, give them free access to powerful services (in Twitter’s case communicating with millions, in Instagram’s case putting filters on their photos and sharing them) and worry about how you make money out of them later.

It’s subtly different to the Facebook and Google business model, in which the frog was placed in water that was already lukewarm: it was clear from the very earliest stages how the users would be monetised (placed advertisements) even if it took a while for them to be squeezed to their full extent (eg the water got hotter).

However, on the basis of recent evidence, the frogs in Instagram’s pan are already starting to get a little jittery.

We’ve just learnt precisely how the company intends to make money out of its users, following its $1bn acquisition by Facebook earlier this year. According to an updated set of customer agreements, which are coming into force next month, Instagram will in future have the right to use its customer photos essentially for marketing purposes to an even greater degree than in the past.

Specifically, you could find yourself starring in an advertisement without your knowledge. Ads might not be labelled as ads. And all your info can be shared with Facebook.

In other words, the heat is on. The big question is whether Instagram users are likely to behave like frogs and stay in the pot. Henry Blodget thinks they will – even as the water bubbles up around them. After all, we have signed up to similarly intrusive terms of agreement with Facebook, so why would a little bit of personal erosion affect us in Instagram’s case?

I’m a little sceptical about this, and it goes back to that subtle difference in water temperature between Facebook and Instagram.

Most of those who joined Facebook did so because it was a social network. From that perspective it seemed reasonable (if, for some of us, spooky) to be advertised at on the basis of their interactions and status updates on the site. Consumers aren’t so silly as to assume that just because they haven’t handed over money to join that they are getting something entirely for free.

Most of those who joined Instagram were lured in by those funky filters they could use to make their photos look cool. Yes, there was a social network bolted on, but the primary consumer offering from the company was a camera app you had to pay for elsewhere (Hipstamatic, Red Bullet etc) and you could get for free with Instagram. It is a leap of an altogether different order to tell those users (who weren’t really aware that they were engaging with the service on this basis anyway) that their photos might start be using in advertising in association with a social network they never even joined the service for.

In other words (and excuse me as I stretch the analogy to breaking point) what if it isn’t merely a case of a frog being heated up in a saucepan, but of a frog being moved from one pan to an entirely different, bubbling one?

And this doesn’t merely refer to Instagram. As I wrote the other week, when Twitter originally started in 2006, it was marketed as an invisible infrastructure for micro-blogging rather than a virtual noticeboard (with ads) like Facebook. After all, the origin of the service was in SMS messages rather than the stream of online tweets it’s metamorphosed into since.

Which is why developers are so furious about the recent changes in Twitter’s terms of access to its network, that threaten to turn it into a Facebook-style noticeboard.

Now, none of this means that users are likely to abandon these services in droves. For most users giving away a little bit more of their personal information won’t be cause enough to abandon their services entirely. Others may decide to abandon Instagram and Twitter. Indeed, some Twitter users are already migrating to a service called – a paid Twitter-style service without the ads or the API restrictions of the original.

But for all of us it’s a reminder that in future we need to be more wary of a social media model which promises to deliver us a particular product for free or next-to-free without a convincing explanation of how it will pay for it.

* There is, in fact, quite a lot of evidence to suggest that the opposite is true, and that a frog is more likely to jump out of gradually-heated water, but let’s leave that aside for the moment.