Facebook Insta-Outrage - Analysis

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Facebook – Insta-Outrage

In August I wrote a piece on Facebook (NASDAQ: FB), shortly after they went public, in which I argued that a portion of their success will depend on how they deal with privacy. I wrote:

The problem for Facebook, as I see it, is that we have a conflicting set of desires here. While advertisers desire well targeted ads for their dollars, the end users want privacy.

Several months ago, Facebook bought Instagram, the very popular photo sharing service, and a few days ago they raised the righteous ire of their user community with a change in their privacy policy that essentially gave them the right to use your photos basically for any purpose they see fit, including selling them to advertisers.

As reported on CNN Money:

The new terms of use, effective January 16, are littered with changes throughout -- but the biggest changes came in the section about users' rights. "A business or other entity may pay" Instagram to display users' photos and other details "in connection with paid or sponsored content or promotions, without any compensation to you."

Additionally, this is a rigid policy from which users cannot opt out. The only option a user has is to close their account before the January 16 effective date.

Additionally, the new language includes photos posted by children.

Since the change was announced, however, there has been a twitter-driven revolution amongst users.

Tinashe ‏@Tinashe writes:

  • REALLY uncool of instagram to "sell" our pics without any compensation for us. Corporations dont care about our privacy or personal rights.

And Danielle Nicolet ‏@DaniNicolet adds:

  • My Instagram account is deleted. Our privacy shouldn't be for sale.

This is, of course, an appalling invasion of privacy, and shows that Facebook has learned nothing from previous snafus on the issue. As I noted in the August post:

Barbara Ortutay wrote for Huffington Post: “…no matter what Facebook does, privacy concerns are still the biggest threat to users' trust and to its growth.”

Instagram has replied with an Insta-reversal tweeting:

We've heard you that the updates to our Privacy Policy & Terms of Service are raising a lot of questions. We'll have more to share very soon.

In their blog post they add:

Our intention in updating the terms was to communicate that we’d like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. [emphasis added]

They continue by admitting it was their mistake

This is not true and it is our mistake that this language is confusing. 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.

The problem here is that it becomes a bit difficult to believe this. Is it really possible that all these high-priced lawyers wrote this document totally oblivious to the implications of the language they were using? Is it credible that the Instagram managers could not see what the language was saying? Does Facebook management think people will believe that it was not their intention to do exactly what they expressly state in their policy change?

Note

Of course Facebook is not alone amongst internet service providers with privacy concerns. Google (NASDAQ: GOOG), for example, has also come under fire for many privacy issues over the years. Wikipedia has an extensive page dealing with these.

Conclusion

Whether this will have a long term effect on Instagram or on Facebook itself remains to be seen. Most likely they will make their changes, these will be more reasonable, and users will adapt since the service is really an excellent one and has rightfully gained incredible popularity.

There will remain, however, an ongoing suspicion of Facebook and what it is willing to do with user content to monetize their enterprise.

In the end, they really need to realize that credibility is a lot easier to lose than to regain.

 

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Malcolm Manness has a Masters degree in Computer Science, and worked for 14 years in development, technical publications and software quality assurance. He has been investing for 20 years. Currently, he does writing, and FileMaker Pro programming on contract.

His short fiction can be found (under pseudonym J. Seunnasepp) at http://50centflash.com/.

 


JaanS has no positions in the stocks mentioned above. The Motley Fool owns shares of Facebook and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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