In April 2012, social media giant Facebook purchased the popular photo-sharing service Instagram for $1 billion. Wall Street analysts applauded the deal as a “match made in heaven.” Instagram (with a customer-base in the tens of millions) was getting access to Facebook’s billion-plus users. Facebook was adding a new service in the hope of attracting even more users. However, within a few short months of the deal, the real agenda behind the transaction was made apparent. At the time of the purchase, Instagram, while developing a very passionate and loyal user base, had yet to figure out how to generate revenue from its business model. The solution appeared in a brief block of text added to the Instagram “terms of service” (TOS) agreement— the same boring, legalese that most users agree to without even reading it. The language of the change read as follows: To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated meta-data), and/or actions you take, in connection with paid or sponsored content or promotions without any compensation to you. In other words, the company appeared to be staking claim to the right to sell the photos and username information of all the content uploaded to the site, without any permission or compensation to the user. With over 1 billion photos already uploaded to the service, the likelihood of finding material worthy of financial remuneration seemed highly likely, but the company seriously underestimated the degree of personal attachment between its users and their respective photographs and personal information. They responded with a fervor that appeared to catch the company completely by surprise. Individual users closed their accounts in droves with accompanying angry tweets and Facebook posts condemning the company’s actions. Several celebrity and commercial users, such as the National Geographic organization and Mark Zuckerberg’s wedding photographer, deleted photographs and suspended their accounts shortly afterward. Cofounder Kevin Systrom responded quickly via the company’s blog on its website and tried to downplay the issue as a misunderstanding, and declared the possibility of Instagram selling users’ photos and personal information as an “interpretation” that was inconsistent with the company’s intent: “To be clear: It is not our intention to sell your photos. We are working on updated language in the terms to make sure this is clear.” While Systrom may be given credit for the promptness of his response, the question remained that if Instagram had no intention of selling users’ photographs or personal information, what was the plan that required the company to make such an explicit change in its TOS agreement? For that, we must look to Instagram’s new parent company, Facebook, whose initial public offering (IPO) had garnered mixed reviews for a list price that seemed to promise highly inflated revenue performance. The change in the TOS, critics argued, was designed to give Facebook access to user metadata that would allow it to offer detailed profile information on its users to prospective advertisers. To put this in operational terms, Instagram would be happy to host multiple photos of your dog or cat, but it now reserved the right to make that information available to advertisers of pet-related products or services. As such, while critics and confused users were free to object, based on their interpretation of the modified language of the TOS, one question remains—how did they think the service was going to remain free to use? Critics of Instagram’s actions used the case to send a bigger message about the dangers of accepting modified TOS agreements without reading them first. However, given that they are usually presented in convoluted legal terminology; are often several pages in length; and are usually presented as the last hurdle before restoring the service you are seeking to use, or the purchase you are trying to make, the likelihood of a positive customer response to such appeals is limited. Nevertheless, the case brought positive attention to a new service site called “Docracy,” that acts as a consumer watchdog by tracking changes in thousands of TOS agreements across the web. It remains to be seen as to how quickly the service will uncover another poorly executed TOS change. In March 2016, Instagram announced changes to its feed algorithm that would modify how users would receive notifications and the order in which they would see images. The change was designed to align the algorithm with that of parent company Facebook, but the outcry from users was predictably negative, even though the changes weren’t expected to take effect for several months

QUESTION

1. What prompted Instagram to change the terms of service (TOS) agreement?

2. Critics and many Instagram customers reacted very strongly to the TOS change. Was there an error of judgment on the company’s part? Why or why not?

3. Was Instagram’s response to the PR crisis over the change in the TOS appropriate? Why or why not?

4. How could Instagram handle these situations differently? Do you think the changes to the algorithm will be sufficient to resolve the issue? Why or why not?