Everyone trots out that line in a cargo-cultish manner. Thing is, you're still 'the product being sold' once you become a paying customer.

Not for startups! They're special.

I think it's more about how they sold the company while the application was still not making any money. People expected to have to pay one day, of course, but by selling the users without the business model, Instagram showed it didn't care about the users.

Letting another company figure out how to make money with your product does sound odd, particularly when the product is the users and not some kind of resource.

Oh I am very much aware of this fact.

But another fact is that if you give someone something for free for a while and then you start to charge for it (or add ads to it) they are going to be upset, regardless of whether they "should" be upset. No one is happy about the experience of having value subtracted.

But this is still not bait and switch.

You can use of the myriad if other apps, like Flickr which stores the images at a decent resolution (instead if the 612x612)

If you start free, stay free. If you start with $$$, then try to go $$. That's just the way it will always work.

They are staying free, they're just adding ads. It's no different than Facebook. Facebook has been and always will be a free site.

Does Instagram have the critical mass that Facebook has? Personal anecdote: I have stopped sharing photos on instagram since Facebook made it easier to share photos (especially in bunch) on mobile.