Instagram grows up: What adding photo tags means for business

Instagram, the world's leading chronicler of embarrassing teen culture, is finally growing up. On Thursday, the service introduced a new feature called "Photos of You," which is basically its fancy way of saying you can now tag your friends in photos. "When you upload a photo to Instagram, you're now able to add people as easily as you add hashtags," the company writes in a blog post. "Only you can add people to your photos, so you have control over the images you share."

If you've ever tagged a photo on Facebook, the system should look familiar. Simply tap a spot on the photo to add the name of one of your pals, which they'll have to approve first.

Nothing Earth-shattering, but it's an important step forward for a small company that still hasn't shown it can grow into a legitimate, money-making entity. According to TechCrunch, brands have been clamoring for opportunities to plaster Instagram's scroll with ads, but the service has so far demurred, choosing instead to focus on growth. The strategy appears to be working, too: During Wednesday's Facebook earnings call, CEO Mark Zuckerberg, who purchased Instagram last year, reported that the service now had more than 100 million users, and was growing at a faster clip than FB.

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But with Thursday's announcement, we're now getting a clearer indication of how the user-friendly platform plans to appeal to businesses. In what appears to be a central tenet of its strategy going forward, Instagram mentioned in a separate business blog post that Photos of You "gives people a new way to explore photos of your business or brand."

At face value, it looks like Instagram is merely giving the brands that use its service another metric besides follower counts and photo likes to gauge user engagement. In actuality, it's giving them so much more.

Take Nike, which has more than 1.3 million Instagram followers. Say a sneaker fan with 200 followers snaps a photo of his new shoes and tags "Nike." Not only is it free word of mouth advertising to 200 sets of eyes, but it gives the shoe-maker valuable consumer feedback about what kinds of shoes kids are buying, where their customers are tagging them from, what their friends are saying about it, and more.

It's two birds with one stone, simultaneously eliminating the innate ickiness of intrusive banner ads and letting a brand's fans do all the legwork.

Despite a few stumbles — namely when it terrified users by changing its terms of service to suggest it could sell their pictures to advertisers — Instagram's platform has more or less remained unchanged since opening up to Android users. Ads may very well invade the Instagram stream in the future; it should be noted that the strategy appears to be working for Facebook. But for now, at least, the service is beginning to show businesses that it's more than just a pretty place to hang out.