The decision by Instagram to change its terms and conditions has caused considerable pushback by users and a media firestorm. According to the changed wording, any content uploaded to the site could be sold for commercial usage by the company without the permission of its originator and with no sharing of any royalties. While the CEO of Instagram has now claimed this is not the intention, the company has not directly dissavowed the recent shift.
According to Instagram, “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 metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.”
So what’s not to like about this manoeuvre? After all, Instagram (like Facebook) provides a service that is free to users and it has to pay for those ever-growing data centres somehow. Like many other online services, it had assumed that advertising would supply the necessary revenues in return for reaching its image sharers.
But advertisers have got smart and do not want to get sucked into another mass media-style market. Instead, they want detailed profiles on who they are reaching and better tools to build engagement. Knowing that an Instagrammaton is connected to people who have already looked at a brand’s promotions would make that person a prime target for the same marketing. That is what the business is working towards, just as Facebook has already done.
The problem for both companies - and other social tools online - is that they have not signed up their users on this basis. Why not? Because consumers are simply not willing to agree to these types of terms and conditions for a service before they know whether they will be using it often.
To put it harshly, the business plan is to get consumers addicted and then sell them. To achieve that goal, users have to get a taste for what is on offer. Ask any drug dealer - the first hit is free. You give away a product when you feel sure those first-timers will get hooked and come back for more.
That is what has happened with Instagram, Facebook and a host of other social tools. Consumers continue to try out new and untested sources, only to find their suppliers want to cash in on them. Despite this, few have come to overtly accept a value exchange in which they will directly exchange their information or content in return for a free service.
Will that ever change? Can businesses spell out the deal upfront and yet still get a fast-growing user base? The economics of any market suggest that some service providers should emerge who do exactly that - we just haven’t seen them yet. In the meantime, any business setting off down the free service route will have to rely on the second-stage rights grab. Facebook’s continued growth seems to suggest this is sustainable, even if it is not completely transparent. This Insta-grab will not be the last.