Monday, January 14, 2013

Three Things We Learned from the Instagram TOS Fiasco

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Instagram's abrupt TOS changes may have lasting negative effects.
In December, users of the popular photo sharing site Instagram (now owned by Facebook) were treated to a proverbial piece of coal for the holidays. Based on media reports from Reuters, this is how it played out:

  • On December 17th reportedly, Instagram abruptly changed its Terms of Service (TOS) to note that it could use its members’ photos, likeness and username for advertisements without permission.
  • Users of the site didn’t notice at first but, rest assured, some did. News of the changes went viral.
  • National Geographic magazine reportedly announced they were leaving the site due to the new terms.
  • By New Year’s Eve, according to AppData reports, about 6 million of Instagram’s 16 million users who access it via Facebook left the site as well. (Although,Instagram disputes AppData’s numbers)
  • A class action lawsuit was launched in California shortly following the changes.
  • December 20th , according to Reuter’s,Instagram CEO Kevin Systrom apologizes and reinstates the old TOS via a blog, and added the thought that  some users had misinterpreted the intent of the new TOS.
  • Instagram users will reportedly be bound by a new TOS as of Jan 19th.
  • As of today, I cannot find out the true impact of the fiasco as ‘Facebook no longer reports new data for this application’ according to a new search I’ve conducted on the AppData site.

We all make mistakes.
Do I blame Instagram for the way it handled the changes? Absolutely; to mask such a large change in the TOS without pointing it out is simply wrong. Whether the intent was to work on ways to monetize Instagram in the future or to take Facebook’s already robust, intuitive advertising platform and put it into place on Instagram, it was wrong. In business, it’s better to be up front with ‘customers.’
Do I blame Instagram for attempting to monetize the business? Absolutely not; although some businesses are founded to serve a greater good, most are in business to make money. If you are signed up for a free service, make no mistake, it is not free. If there is no product being sold, no membership fee, no identifiable means to distinguish how it is making money, chances are, the product is you and your data.
Data is a valuable commodity these days given we are a largely consumer society.
Browsing habits, referring sites, demographic information like family size, your job, what school you graduated from, your birthday; even the titles and subjects of your pictures, can tell marketers something about you. Facebook and the multitude of free apps don’t care about when your birthday or anniversary is but, they do care how old you are and your marital status so they can use your demographic information to sell themselves to potential advertisers.
So what lessons have we learned from Instagram’s PR nightmare?
Buyer beware: Instagram is not the first business in the world to change its TOS (or a contract) to reduce your privacy or to get more data (in this case your pictures) from you. The problem with most TOS statements is that they are written by lawyers, for lawyers. They are also arduous to navigate through, often having 20 or more headings; each with 10-20 subheadings. How many times have you seen the little box on the screen, scrolled quickly to the bottom and clicked I agree? I’ve done it plenty of times.
Small print and multiple pages are not generated by accident. Not only does it reduce the chance that you will read it in full; it almost guarantees it, while indemnifying the company against potential legal action. Read the TOS every time you sign up for a service and when it changes to know what you’re agreeing to.  
Honesty is the best policy: It’s much harder to win a disgruntled customer back  than to be upfront with potentially bad news (anyone remember MCI WorldCom's 'delayed future billing' or Bank of America's debit card fees?). You can rely on the fact that many customers will not care or not take any action whatsoever. However, you lose credibility and relevance, even with the masses, when you anger your top customers. Maybe this was a case of anchoring to make a watered-down monetization scheme seem less ‘bad’ to users but I doubt it; a third of your users (your data) is too high of a price to pay.
Instagram will go away: Call this my first bold prediction of 2013 (although I don’t know how bold it really is). Instagram lost a third of its Facebook users in 10 days. I think the rest will eventually follow. Without a way to monetize its data without severe scrutiny now, it is virtually worthless to Facebook unless there is some proprietary code that is of value to them. Now the only way they’ll be able to realize the app’s full potential is to pawn it off on an unsuspecting suitor. If they can’t sell it, it will go away; sooner than later. Why invest in a product that is losing money that shows little chance that it will make money in the future?
Do you read the TOS statements of your favorite sites? Have you uncovered some shocking revelation when you read them that made you leave? I’d like to hear about it.

Josh Kaplan writes on various subjects including management, information technology breakthroughs, healthcare IT recruitment and innovations, big data, IT staffing and recruitment, and technical news and trends.