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 (or app), 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.1
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.”3
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. Firstly, it would be foolish for Instagram to walk away from such a lucrative revenue opportunity. On January 17, 2013, it announced the following powerful statistics6 :
- 90 million Monthly Active Users
- 40 million Photos Per Day
- 8,500 Likes Per Second
- 1,000 Comments Per Second
With staggering numbers such as these, how could a zero-revenue company not optimize these opportunities? And 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 in addition to Facebook’s subpar performance since going public last year.
Secondly, users pay absolutely nothing for using Instagram's services; there is no price per photo uploaded, monthly/annual subscription required, or pricing scheme of any sort. Individuals and celebrities are not the only ones who derive personal benefit from Instagram, but businesses, too. Many small businesses like to use Instagram as a marketing tool because it is free and effective. For instance, some will upload pictures of new product arrivals to lure new and/or existing customers to come in and purchase. Not to mention, businesses like to have Instagram accounts because the service allows them to build their brand and customer loyalty through daily/weekly posts, thus, giving them the venue to engage and interact with customers in ways they could not do previously.
This ethics case was written by Alexis Babb and Amanda Nelson, both seniors at Santa Clara University and Hackworth Fellows in Business Ethics at the Markkula Center for Applied Ethics.