Honestly, do they want people to build scrapers using sets of IP addresses?
No. They are allocating their money where their business is. The idea of "ecosystems" with 3rd party integrations has been shot down nearly everywhere - all the "big tech companies" have one thing in common: they want people to be locked in their environment as long as possible by any means neccessary and legal, as this is where the tasty ad revenue comes from.
A 3rd party Twitter client, for example, cannot show ads (and, so, generate no revenue for Twitter). Therefore, it is perfectly logical that Twitter makes their API as bad as possible for 3rd party clients (e.g. no polls, images in DMs, group DMs).
Content producers, on the other hand, are the ones who are making your platform more attractive to your content consumers. You want to make it as easy as possible to put high-quality content on your platform, and a key component of ease of access / publishing is a powerful API.
Developers have. But unfortunately, most that the users (aka our customers) want is a place where they can share cat videos, have instant communication with friends and (distant) relatives and, depending on allegiance, Trump or Clinton memes in peace. There are only two things that can not be done on the social networks: gambling and porn. Everything other has been slowly absorbed, especially by Facebook.
Also: when you're working 10+ hours a day or more, you most often don't have time to maintain your own blog, much less a full blown web server. There's the reason why Instagram, FB and Twitter are so damn successful: they're essentially frictionless after the sign-up process.
Do they make more money when someone fires up the IG app and watches ads, or a third party tool sucks data out and displays it elsewhere?
The developer API is not the product.
I really enjoy Instagram the app to post photos of my travels but as the years go by it's feeling more and more locked down. I'm not really sure what the alternatives are, Flickr?
The I just need an app to make it easy to post. Instagram is the best I've found for that.
This also comes on the heels of IG dialing down their API limits from ~5000 per hour to 200 per hour [0], which is ridiculously low. If my app has 20 IG accounts connected to it, each account can only hit 10 per hour. Crippling.
[0]: https://9to5mac.com/2018/04/03/instagram-api-limits/