Instagram Scraps Changes Amid Outcry - Businessweek

Facebook Inc. (FB)’s Instagram photo service is scrapping proposed changes to its service terms after an outpouring of complaints that the company would use the policies to sell users’ images and information without consent.

“The concerns we heard about from you the most focused on advertising, and what our changes might mean for you and your photos,” Instagram co-founder Kevin Systrom wrote in a blog.

Instagram unveiled new terms on Dec. 17 that it said would give advertisers more flexibility in using photos, user names and likenesses in ads. The moves reflect pressure on Facebook to wring profit from its Instagram acquisition and reverse a sales- growth slowdown (FB). Yet, forcing users to accept changes too swiftly leaves the company at risk of revolt, said Ray Valdes, an analyst at Gartner Inc.

“It is part of the pattern that Facebook has had over the years, where they either unwittingly or consciously push users beyond their comfort zone with regard to disclosure of private information,” Valdes said in an interview.

Facebook Chief Executive Officer Mark Zuckerberg agreed to buy Instagram for about $1 billion in cash and stock this year. Instagram, with more than 100 million users, lets people upload and manipulate photos for sharing over the Web.

Instagram had proposed earlier this week that users agree to let advertisers display names, likenesses or photos in ads or sponsored content, and it said marketers could take these steps without compensating users or seeking permission. Instagram also said it may not always identify paid services or sponsored content.

Kardashian’s Frown

The backlash was swift. Users -- from the rank and file to sports figures such as LeBron James -- fretted that the company would use the new language to sell their images to the highest bidder. Many people threatened to leave before the new terms were to take effect on Jan. 16. Thousands posted complaints on Facebook’s Instagram page.

“I really loved Instagram,” celebrity Kim Kardashian, who has 5.7 million followers on the service, wrote on her Twitter page, using a symbol for a frowning face. “I need to review this new policy. I don’t think it’s fair.”

Systrom initially responded to the backlash on Dec. 18, saying in a blog that the new terms would remove language suggesting that photos would appear in advertising.

Today’s post goes further, saying that the advertising section of its terms of use will revert to the original version, in place since October 2010.

‘Confusion, Concern’

“There was confusion and real concern about what our possible advertising products could look like and how they would work,” Systrom wrote. “Going forward, rather than obtain permission from you to introduce possible advertising products we have not yet developed, we are going to take the time to complete our plans, and then come back to our users and explain how we would like for our advertising business to work.”

Zuckerberg has had to backtrack on service changes in the past. In 2007, he apologized after users complained that the social-networking site’s Beacon advertising program violated their privacy. The feature tracked what users buy online and shared the information with their friends.

Internet companies often use personal data to help advertisers convey marketing messages, said Martin Pyykkonen, an analyst at Wedge Partners in Greenwood Village, Colorado. The idea of using images may take the practice too far, he said.

“While using personal information, interests, likes, et cetera, is done regularly with Internet advertising, it’s a different story when photos or likeness images would be directly used and more readily show a visual identity of people,” he said.

Facebook needs to avoid privacy missteps, lest it alienate users, Valdes said.

“There is a cost over time to the Facebook brand,” Valdes said. “Each one of these dings can add up to big dents.”

To contact the reporters on this story: Tom Giles in San Francisco at tgiles5@bloomberg.net; Mark Milian in San Francisco at mmilian@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net