In the wake of the Instagram backlash—and now pending lawsuit— growing privacy concerns may spur social media companies to rethink advertising-based revenue models, said Rich Greenfield, an analyst at BTIG.
(Read More: Instagram Furor Triggers First Class Action Lawsuit )
"There's a huge issue around privacy in trying to turn what we've deemed kind of this issue that each of these companies has in terms of social responsibility and how to turn that into profit generation, it's just not an easy task," Greenfield said on CNBC's Squawk on the Street Friday. "It's one of the reasons we keep wondering—as social media plays out online—whether advertising is actually not the answer because it's too invasive privacy-wise and whether there needs to be new forms of monetization that takes center stage that doesn't exist today on any of these platforms."
Facebook-owned Instagram recently came under fire for making proposed policy changes to its terms of service which stated that businesses could pay the photo-sharing company to use users' data or images "in connection with paid or sponsored content or promotions." (Read More: Instagram Ditches Changes to Advertising Policy )