I had worked for a social network, and our system provides a function to let user upload their photo then transform it to some fixed size of original one. We did have pre-transformed and on-demand too.
Pre-transformed for the image that's most viewed by user, like new feed's photo (720x720), large photo (1024x768), and the origin one (if user's screen is detected as big screen), we have to resize it asap. Other sizes, like thumbnail, we do on-demand transform using nginx resize filter plugins, and caching using varnish and/or traffic server.
That system have been working well until this time.
I would say on-demand transformation is good idea, since you don't have to store resized-image that's never viewed by any user, so you save your storage. But that idea must be implemented well, very well if you're going to serve million users.
