This story was written by Keith Dawson for UBM DeusM’s community Web site Develop in the Cloud, sponsored by AT&T. It is archived here for informational purposes only because the Develop in the Cloud site is no more. This material is Copyright 2012 by UBM DeusM.

Instagram Miscommunicates on Monetization

New terms of use stirred the hornet's nest that is the Internet.

Instagram's first try at new terms of use had the Net believing the company would sell its users' photos to advertisers without remuneration. Seems like it was a false alarm.

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Instagram is the company behind the smash hit mobile photo app that was bought by Facebook for $1 billion (later downgraded to $735 million when Facebook's stock tanked) earlier this year. This week Instagram announced changes in its privacy policy and terms of use that, according to a later hasty update from the company's co-founder, were widely and wildly misunderstood.

Here is some of the new wording that had many Instagram users upset:

We may share your information as well as information from tools like cookies, log files, and device identifiers and location data with organizations that help us provide the service to you... [and] third-party advertising partners... To help us deliver interesting paid or sponsored content or promotions, you agree that a business may pay us to display your username, likeness, photos, in connection with paid or sponsored content or promotions, without any compensation to you.

You can read the company's first stab at a new privacy policy and terms of use for yourself. Instagram's bland introduction to them is here on the company's blog.

Does that sound to you like Instagram is giving itself the right to profit from the photos you upload? Me too, and much of the rest of the Net besides. Here is developer Reginald Braithwaite's translation of the legalese into English, for one example: "You are not our customers, you are the cattle we drive to market and auction off to the highest bidder. Enjoy your feed and keep producing the milk." And actor Wil Wheaton points out that random friends, acquaintances, and bystanders of an Instagram user could themselves show up in targeted advertising without notice or remuneration.

Yesterday evening Instagram co-founder Kevin Systrom attempted to explain that it was all a big misunderstanding. He promised that new wording will be forthcoming that will make Instagram's actual (benign) intent clear to all.

Whither?
There is some evidence that people were abandoning Instagram yesterday in the wake of this snafu. The company's export site, which allows users to download a ZIP file containing all of their photos, was reported to be quite slow and possibly overloaded. It's easy to find instructions on how to delete your Instagram account entirely after retrieving your photos.

Flickr is working hard to pick up any Instagram deserters. Its new iOS app is getting rave reviews. And Flickr has put up a blog post reminding everyone that on its service, your photos remain entirely under your ownership and control. Veteran developer Stuart Langridge (@sil) tweeted: "Seems like Flickr is the sweet uncomplaining always-there-for-you boyfriend who everyone's returning to after dalliance with the 'bad boy.'"

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(from the Pinboard blog)

Lessons for developers
Regardless of the soothing attempted by Systrom, Instagram, in company with Facebook and Twitter, is pushing the boundaries of what people will put up with in order to enjoy free services on the web. They are far out ahead of laws and courts. If you, as an app developer, want to enjoy an income stream from the apps you create, and friendly relations with your users, almost any business model is preferable to the monetization route these large social networks are pursuing.

On The Atlantic, Alexis Madrigal wrote a piece addressed to Instagram users, titled Why You Should Want to Pay for Software, Instagram Edition. Its lessons can equally well be turned around for app developers. If instead of selling to Facebook, Instagram had gotten $5 a month from 20 percent of its 100 million users, "they'd be looking at $300 million in quarterly revenue. That's a nice chunk of change when you have a baker's dozen employees." The math is still wildly favorable for a user base one tenth that size. That's success that does not come at the cost of user privacy.