Instagram today announced the third version of its extremely popular mobile photo sharing application, and took a major step forward towards solving the consumption conundrum. If the first version of the app was essentially an introduction of mobile-photo sharing and use of filters, the second version of Instagram was all about making the experience better, faster and simpler.

With this new and third version, Instagram has spent most of its energy on the continuous consumption of photos and stories behind those photos. The newest version of Instagram is pinning its hopes on geo-tagging, which is masked in a feature called Photo Map. And with this release, the company might have taken a first tentative step towards a unique business model.

In the new version you can select photos you wish to make public and they get pinned to a location. For instance, if you have ten photos from Helsinki, Finland, they all get clustered together. These clusters are visible as collections on a map. You can see many collections on the map and can tap to zoom in (or out) to get a closer and more contextual view.

With every major release, we pick a theme – and for this one we’ve focused on the browsing experience. We’ve introduced a new and unique way to browse your photos and others’ photos on a map, which means you’re no longer constrained to browsing through page after page of photos. We’ve also worked hard on updating all the screens in our app to be more visually consistent and polished. [From Instagram blog]

There are other improvements in this release, such as a new look for user profiles, the Explore tab, hashtag and location pages. The photo upload screen has been upgraded and ability to fight comment spam has been made more granular. Photo Maps allows you to showcase your photos on a map and also see other user’s maps as well, as long as those are approved by the other users. The list is too long and Instagram’s blog post has more details.

Don’t worry – there are massive improvements in the actual service as well. For instance, your photo feed loads about ten times faster than the older version. There is unlimited auto scrolling and the photos load much faster than in the past. But the real magic is photo consumption.

Location Location Location

“Chronological feed focus has turned data into ephemeral,” said Kevin Systrom, co-founder of Instagram. “So the stuff we share disappears. We wanted to see how we can make it so that the data doesn’t disappear and we decided to focus on geo-data.” Systrom explained that photos often come with other information – who you are with, where you were and that helps turn photo into a “experiencing a moment of time.”

He argues that we often remember places we have visited. For instance, a trip to London or Berlin or New Delhi is something we remember, even though we might forget some individual memories. It is one of the reasons why Instagram has bet on using geo-data as a way to discover photos.

What Instagram is offering isn’t novel. In 2007, the pioneering photo sharing service Flickr had launched a global map-based visual navigation. They wanted to replace search with discovery and Instagram is going in that direction as well. On mobile, text-based search is not an easy option. Instagram wants to use device’s built-in capabilities to help with discovery of the photos. And they are starting off with geo-location.

Of course, normal people don’t care about geo-location. But tell them how it will help them go back into time and share memories, and they are going to buy into the whole geo-location. Instagram’s approach: keep it simple.

This focus on keeping things dead simple is one of the reasons why Instagram has gone from zero to over 80 million members in less than two years. Facebook is buying the company for hundreds of millions of dollars, if the regulators approve the merger. But more importantly, Instagram has become the most popular way of sharing photos on the mobile phones.

Twitter better watch its back

This scale of growth – hundreds of photos uploaded per second and a total of more than 4 billion photos – the company is starting to look like a rival to Twitter as a place for social conversations. Today, Twitter is much bigger, but Instagram is growing at a rapid clip. Instagram has become popular with youngsters who are bypassing Facebook and Twitter and instead communicating via photos and comments on Instagram. As Mark Hall observed on his blog:

I’ve been on Instagram for a while, from when it launched, but it wasn’t until I saw how my 13-year-old daughter and her friends use it that I truly understood it. For them, it’s a replacement for Facebook. They share photos, but those are just points of entry, a way to a conversation. They are status updates, expressed visually.

They tart up their photos and comments using an array of 3rd party apps like Versagram, PicFrame, Emoji. It’s a ping to let your friends know you exist, and what your doing; and you hope for a “like” (a ping back) to let you know you’re not alone on the network. Of course, this is what we’ve all been doing with Instagram. We’ve just been under the illusion we were sharing photos. Seeing the behavior of these 13-year-olds made that clear to me.

We’re not using Instagram to make art. Or to hone our craft as photographers. It ain’t Flickr. We’re just trying to connect with our friends, to start a conversation. Instagram is really a communications platform disguised as a photo app.

Social platforms have always been about communication. Instant Messaging, Blogs, Facebook, Twitter – they are essentially platforms of communications. Sometimes that communication is a smiley face, a blog post, a poke, a retweet or a like. Photos too are an atomic unit of emotion and communicating that emption.

“Photos without metadata are just photos, but with metadata you can start to do very interesting things,” added Systrom. “You can tell the story of your life or events.” The photos created by a smartphone’s camera are packed with metadata and it helps the company start arranging the photos in different ways and encourage new behaviors.

As the number of photos shared on the network increases, Instagram now has an opportunity to view and offer a view into what is happening around the planet at any given moment. The Olympics in London or Oktoberfest in Munich – Instagram hopes that one day it will be able to surface photos of such events by a proverbial swipe. Systrom cautioned that we shouldn’t get too carried away. “We are creating a signal and hopefully in the future we can surface events or news happenings,” he said.

The challenge of course is that Instagram is increasingly populated by folks in their teens and I wonder if they will care as much about telling the story of their life as well some of us old farts. Systrom argued that Instagram has more than teen-members and more importantly, even they would like to share their summer stories and special moments with friends.

A Business Model?

As the company starts to arrange photos into collections based on locations or events, it also can start to create an opportunity to inject sponsored photos (sponsored stories if you may) and start to think about revenues – something that had eluded the company thus far.

A recent report by Simply Measured, a Seattle-based social media research company pointed out that nearly 40 percent of the Interbrand 100 are already on Instagram. These brands could find ways to create new engagement behavior and redefine brand advertising. Of course, all that is in the future – for now, Instagram is hoping that people love the new features.

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