Facebook Inc (NASDAQ:FB) has made a complete 360 degree turn on the new Instagram terms of service. It was announced yesterday that the company will revert to Instagram’s original terms in the advertisement section of the terms. This move is in response to a huge backlash against the company’s change in their terms of service.
The news was announced today on the company’s blog by its co-founder, Kevin Systrom. The executive had already come out earlier in the week to convince users that it was never the intention of Instagram to sell its user’s photos.
Nomad Investment Partnership: Keep An Eye On The Unseen Risks
There are many ways to define risk. Warren Buffett has said that "risk comes from not knowing what you're doing." Q3 2020 hedge fund letters, conferences and more His mentor, Benjamin Graham, believed that risk should be measured as the chance of a permanent capital impairment of an investment. Seth Klarman also holds this view. Read More
Most of the opposition to the photo sharing service’s new terms were based on the assertion that the ad section would allow the company to sell user’s photographs. That angered many users. Today’s change removes the sections of the terms of service which grants that sort of license to Instagram.
Instagram is just the latest service that has attempted to assert ownership over data hosted on their service. The most notable examples come from Apple Inc. (NASDAQ:AAPL). The firm claims that music bought on iTunes is a lifetime lease rather than an outright purchase. Apple also claims ownership of the software on devices it sells, though that ownership has been successfully challenged in court.
The need for the company to begin making money could be inferred from today’s announcement. Systrom said that Instagram may change its terms of service in the future, but it first has to decide how it wants to approach advertising. It is clear that the company is uncertain of its future.
When Facebook Inc (NASDAQ:FB) acquired Instagram, it sent many different signals to investors awaiting the firm’s IPO. It demonstrated that the firm would not blanch when faced with a decision. Mark Zuckerberg, despite his youth, was able to make tough decisions.
It also demonstrated a dark undercurrent of the tech equity market. Value is being measured by user numbers, rather than by revenue numbers. This is fine for a short period while businesses are consolidating, but user numbers can change very quickly. In the purchase Facebook Inc (NASDAQ:FB) showed that it was a victim of the same valuation mentality that made its IPO such a failure.
Instagram is still a popular service, its executives are clearly wary of doing anything that would cause it to alienate its user base. That attitude has both positive and negative connotations. The firm needs to alienate some users in order to increase its revenue above zero.
Instagram’s future is unclear, but the announcement that the company is reverting to it older terms of service demonstrates a possible immaturity in making tough decisions. If Facebook Inc (NASDAQ:FB) wants the firm to monetize it will have to ensure greater decisiveness in future.