A few weeks ago Instagram, the popular photo filtering and sharing app, released its updated terms and conditions. With over 80 million users, many of Instagram's users were unimpressed with the new terms. Some were construed in such a way that many users were uncomfortable because they interpreted the changes to mean that Instagram can and will sell their pictures to third parties. Many unhappy users threatened to delete their accounts before the terms take effect on January 16, 2013. Can Instagram make up for its loss in users with increased revenues?
With many users wanting to leave Instagram because they feel "violated," the company quickly re-evaluated how these terms come across to users. What many people don't realize is that Facebook made a similar change a few years ago. Facebook now has one billion usersand owns Instagram. After buying it for almost a billion dollars, Facebook is trying to find a way to monetize the company.
The Fine Details
First off, Instagram does not own your content. Simply put, it has the ability to license your photos to companies and, if they wanted to, they could sell them. Many interpreted this as Instagram selling consumers' photos without compensation. With access to personal information such as family pictures, information on spending habits and food preferences at stake, many celebrities and users within the general public have felt that this was out of line on Instagram's part. Some celebrities were outraged as they believed this could lead to Instagram using photos of them for advertisements and brands which may in turn hurt their business and personal brands. Many celebrities moved to boycott Instagram by tweeting that they were closing down their accounts, something that could be incredibly detrimental to the company's business. In the days to follow, Instagram began to clarify that it does not intend to sell photos; it merely wants the option to effectively advertise its brand.
Who Controls Content?
Another question users had is who would maintain control of what is uploaded and deleted, as well as whether private accounts would be off-limits to prospective advertisers. Instagram has ensured that it will continue to allow users to choose what is uploaded and deleted on their accounts. Kevin Systrom, one of Instagram's co-founders, claims it was never the company's intention to claim that it would allow non-private accounts to be made public or to sell any of the photos you own without compensation. He suggests that perhaps the terms were taken out of context as Instagram's hope is to promote advertising and brands within Instagram and create meaningful ways to discover new brands and accounts. Systrom also apologized to the many Instagram users and asked them to remain patient while it sorts out and clarifies the updated terms and conditions.
Building on Business Objectives
Facebook's plan to monetize Instagram through advertising is speculated to bring in between $500 and $700 million in advertising revenue over the next three years. What we all need to remember is that Instagram is a business. By increasing its advertising revenue, it has the opportunity to become profitable and stand the test of time.
The Bottom Line
With the clarification of what Instagram intended to communicate to users, Instagram may save itself from losing thousands of them. Users who leave or pre-emptively closed their accounts may re-open them after finding out that Instagram doesn't intend to sell their photographs. By increasing ad revenue, Instagram hopes to bring in a few hundred million dollars per year, which would more than cover the cost of a few hundred users closing their accounts or boycotting the company.