I just read Wharton Professor Pinar Yildirim’s article on how Facebook can potentially monetize Instagram without alienating its user base (too much).

Prof. Yildririm makes sense. He basically says that major options for Facebook include:

• a subscription-line service (think Dropbox or Flickr) where photo album space is only free up to a point
• advertising, including location-based or contextual ads
• selling users’ content, but with explicit user consent and by sharing the revenue with them

I think there is a fourth option that makes more sense for Facebook: don’t monetize Instagram.

I think Facebook is already walking on thin ice with many of its users. Adverting on the website and on its mobile apps is becoming increasingly noticeable and intrusive. The company is approaching what much of its user base is willing to take. Not monetizing Instagram would move that line a bit further away.

Facebook should consider Instagram as a billion dollar product feature that makes its core product that much more attractive to users, and restores some of the users’ goodwill that the company has squandered. Not monetizing Instagram is actually the best way to monetize it.