It seems to be working for Instragram, but they implemented the simplest possible thing for stories - you can have your "everyone" group, or your "close friends" group. No custom labels, no additional groups, just those two and thats it. I see quite a few friends who never even participated on G+ or similar making use of it.
Yeah, that's a good example: if you must have the user add metadata, keep it as simple as you possibly can. "You have exactly two buckets, everything goes in one or in the other" is about as simple a metadata system as you can get.
