Reference no: EM131020340

Case: Instagram and the Ethics of Privacy

Founded in 2010, Instagram considers itself to be "a fun and quirky way to share your life with friends through a series of pictures." By downloading the free Instagram mobile application, users snap a photo with their mobile phone, then choose a filter to transform the image, and can share it on various sites such as Facebook and Twitter. The company views itself as more than just a photo-storage tool but a way "to experience moments in your friends' lives through pictures as they happen. We imagine a world more connected through photos."

In April 2012, the 13-employee company was acquired by social networking giant Facebook for approximately $1 billion. In less than three years, Instagram has become one of the fastest growing social media platforms as seen by its estimated 12 million daily users.

In December 2012, several months after being acquired by Facebook, Instagram announced new changes to its privacy policy and terms of use. According to the updated terms, "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," and there was no apparent option to opt out. The backlash was immediate. Photographers and celebrities were particularly upset, given that their photos were a part of their own businesses and brand images.

Instagram was quick to respond that its intention was simply to improve advertising. Co-founder Kevin Systrom posted, "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. 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."

Instagram's privacy policies and terms of use were once again updated in January 2013. The current terms state, "You hereby grant to Instagram a non-exclusive, fully paid and royalty-free, transferable, sub-licensable, worldwide license to use the Content that you post." Instagram also reserves the right to share users' information (including analytics information, log files, cookies, and location data, as well as the content users post) with companies affiliated with Instagram (mainly Facebook), third-party service providers, third-party advertisers, and "other parties."

While the initial backlash against Instagram has been quelled, there is still uneasiness among users regarding privacy issues. Instagram has to walk a fine line to keep its users happy and still turn a profit. On one hand, Instagram offers a free service to users, which up until this point has been free of advertisements, unlike other social media platforms like Facebook. In order to remain a viable company, Instagram has to bring in revenue somehow, and advertising seems the obvious choice.

We believe that it is not unreasonable for Instagram to try to make money using member photos for several reasons. First, it would be foolish for Instagram to walk away from such a lucrative revenue opportunity.

Let us not forget that Facebook purchased the company for $1 billion in cash and equity in April 2012. Facebook owes it to its shareholders to try to monetize Instagram considering how much it spent on this company.

Second, users pay absolutely nothing for using Instagram's services. There is no price per photo uploaded, no subscription required, or pricing scheme of any sort. Individuals and celebrities are not the only ones who derive personal benefit from Instagram. Many small businesses like to use Instagram as a marketing tool because it is free and effective. Some will upload pictures of new product arrivals to lure new or existing customers to come in and purchase. Businesses like to have Instagram accounts because the service allows them to build their brand and customer loyalty through posts, giving them the venue to engage and interact with customers in ways they could not do previously.

1. How much, if any, of our information should Instagram be able to share with third-parties and advertisers?

2. Why are Instagram users making such a fuss about the revised privacy policy if they are gaining so much personal satisfaction or business from a service that is free?

3. Are Instagram users reasonable in expecting that their postings be kept private?