One reason people buy paintings is because they're hand-made - and obviously so.
A print is machine-made - and obviously so. It's reproducible, so it has no obvious uniqueness.
Some people have tried making one-off prints. That never really works out, because one of the important elements in art objects is visible proof of unique human labour. A print can't supply that, even if it's a digital one-off. The labour may still be there, but it isn't visible in the way that the effort needed to cover a canvas is.
Art is a social signal of disposable capital, aspiration to social status, and ability to command effort. Having an art object legitimises an image and a buyer in a way that a print can't. It also adds a sense of permanence, which some people like when they want to make memories more tangible.
Instapainting capitalises on that by selling to people who want a painting but don't know much about art. I'd guess some of them like the idea of having a painting of a memory, while others like the idea of telling visitors that they had something painted specially.
The bell curve wins again. This turns out to be a much bigger market than the one for people who want a painting and know something about art, and very much bigger [1] than the market for people who buy expensive paintings and know a lot about art.
The idea isn't actually new, but it's possibly the first time it's been done on an industrial scale. Back in the 00s there were services in the UK selling stylised portraits for similar money. They were fairly successful, but limited by having a small pool of artists to draw from. Chinese labour has changed that and made a mass market possible.
[1] But not necessarily more profitable.