There is a trend that is obvious and it goes like this: a company, vying for users and mass distribution, builds a product, opens up their innards in the form of an API and hopes it can create an ecosystem to ensure longevity as other companies build their businesses on top of those APIs.
There is nothing controversial here at all – seems like a logical process: Build + enable = user adoption. In fact this has become a defacto business model for this generation. But at some point someone needs to ask a very simple question: How does the company that is building the ecosystem make money?
Instagram, everyone’s favourite photo/filter/sharing app on iPhone (mine included), is a perfect example of this in action. They have an active user base of over 13 million yet haven’t turned on the revenue spigot yet but their ecosystem is heating up.
One of the companies to recently announce a service that hugs off the Instagram API is Ottawa-based CanvasPop. Their business is to take any photo you have and turn it into hangable art on canvas. They can make your worst quality digital photo seem like a work of art (very similar to what Instagram does) that you feel comfortable hanging on your wall.
CanvasPop has opened up their services to take your Instagram photos and have them printed on canvas breathing life into your digital throwaways. They are doing this to make money. They are doing this because there is a strong and fiercely loyal user base already snapping one photo per second with Instagram. They are doing this because they have a service that can make money from someone else’s clients.
This is important because at what point does the owner of the user, in this instance Instagram, become marginalized by the companies making money off of their service. Every time someone buys a print of an Instagram photo from CanvasPop, Instagram loses a revenue opportunity while CanvasPop gains a sale and a future marketing opportunity. Essentially, CanvasPop has shown more value – one that someone is actually willing to pay for – than the originator in Instagram.
User hoarding is a problem in the app economy but it is smart companies like CanvasPop that can use this to their advantage. Adding a small amount of value to an existing user base and charging for it is pure profit.
UPDATE: With a wonderful sense of timing, The Verge has posted a story today on Printstagram, a San Francisco-based company that will print you Instagram photos on Polaroid-like matte cards, stamp-sized stickers or magnet-backed books. I’d be remiss if I also didn’t mention my interview with Sincerely co-founder, Matt Brezina. Sincerely’s Postagram service leverages Instagram to send a postcard of your photo to anyone, anywhere, for 99 cents.