Instagram as an island economy

03.53, Wednesday 11 Apr 2012

Facebook bought Instagram for a billion dollars.

If you don’t know:

  • Facebook is a corporation with a database in which they would like to record every act that every person makes, annotated with the place and time, and another database that lists every social relationship each person has. They are persuading people to do this by being the world’s second virtual society, the first being the internet itself, the difference with Facebook being that everything in the society is recorded in a form that makes cross-indexing simple.
  • Instagram is a corporation with a smartphone app that lots of people use to take and share photos. Instagram makes it easy to take pretty photos, and to see the pretty photos of your friends. The photos are used to (a) represent yourself to your friends, and (b) act as condensation seeds for social interactions of the type (i) grooming and (ii) conversation.
  • A billion dollars is a lot of money.

Not users but producers/consumers

The other day I picked some choice quotes from ‘Marx at 193’ (an article by John Lanchester). Here’s one: This idea of labour being hidden in things, and the value of things arising from the labour congealed inside them, is an unexpectedly powerful explanatory tool in the digital world.

What is the labour encoded in Instagram? It’s easy to see. Every “user” of Instagram is a worker. There are some people who produce photos – this is valuable, it means there is something for people to look it. There are some people who only produce comments or “likes,” the virtual society equivalent of apes picking lice off other apes. This is valuable, because people like recognition and are more likely to produce photos. All workers are also marketers – some highly effective and some not at all. And there’s a general intellect which has been developed, a kind of community expertise and teaching of this expertise to produce photographs which are good at producing the valuable, attractive likes and comments (i.e., photographs which are especially pretty and provocative), and a somewhat competitive culture to become a better marketer.

There are also the workers who build the factory – the behaviour-structuring instrument/forum which is Instagram itself, both its infrastructure and it’s “interface:” the production lines on the factory floor, and the factory store. However these workers are only playing a role. Really they are owners.

All of those workers (the factory workers) receive a wage. They have not organised, so the wage is low, but it’s there. It’s invisible.

Like all good producers, the workers are also consumers. They immediately spend their entire wage, and their wages is only good in Instagram-town. What they buy is the likes and comments of the photos they produce (what? You think it’s free? Of course it’s not free, it feels good so you have to pay for it. And you did, by being a producer), and access to the public spaces of Instagram-town to communicate with other consumers (access to these spaces is so valuable to me that it keeps me using the iPhone, a model of smartphone which can run Instagram, rather than Windows Phone 7 which I have used and enjoyed, but cannot).

It’s not the first time that factory workers have been housed in factory homes and spent their money in factory stores.


  • There is a way of identifying the various value exchanges, which means there should be a way to calculate the aggregate value.
  • However, Instagram is more-or-less a closed economy: producers are paid in Instagram-dollars and consumers pay with Instagram-dollars. The loop is so tight that the Instagram-dollars are invisible. So how is the aggregate value to be calculated? Instagram-town is barely connected to the US dollar so we don’t know what the value is.

I will say that it’s simple to make money out of Instagram. People are already producing and consuming, so it’s a small step to introduce the dollar into this.

The question is: what will the exchange rate be?

Island economies and colonisation

The situation of Instagram is that of an isolated island economy, separate from the outside world, being linked to the global economy. How do we figure out what it’s worth to the global economy? How do you value a closed system?

I can think of three examples: Japan’s period as an autarky (self-sufficient economy) in the 1850s; China’s transition from a closed to a linked economy over the past decade; a Pacific island such as Naura, in the middle of nowhere, being colonised.

The third makes me think that the business of these virtual society companies (there are lots) is to isolate some settlement on an island, allow it to develop for a small amount of time, and then colonise it. This is the story of empire, but it’s also the story of expansion. Think of the Wild West: first the people, then the railways, the banks, the law, and government.

But the Wild West ended up okay, part of it we call California. Both Instagram and Facebook are based there.

Maybe Instagram is worth a billion dollars, there’s certainly a lot of labour encoded in the objects of its production. More valuable, I think, for Facebook is the general intellect I have not mentioned: that developed by the factory owners. They’re highly accomplished at paying their workers very little (i.e., since there is no money changing hands, we measure this by observing that the workers are highly productive) and, out of their workers, training good marketers. Facebook needs that in order to complete their database.

Money; users

More interesting to me is the question of what happens when the workers organise, and demand a wage that is transferrable between the island economies of the internet. I’ve absolutely no idea what that would even look like, a transferrable store of labour but one in which the act and value of labour is contextually variable according to its position in a social network. But I can’t imagine money itself looked entirely obvious before it was invented either.

The second interesting point is that the word “user,” as in a user of Instagram or Facebook, is dangerous, because it hides all of this.

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