Months after Facebook acquired photo-sharing application Instagram for a cool $1 billion, this week, the social networking giant announced its new plan to monetise it.

The revised user terms and privacy policies had drawn flak from Instagram users and privacy rights activists. The policy change notifications implied that the company could use photos and other content uploaded by users, to display ads, or to use the content in ads. Appended to this clause are two conditions wherein users hand over their ‘transferable licence’ and ‘sub-licensing’ options to Instagram.

The clause, stated on its policy document, stated: “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”.

Needless to say, that the company provides no exit route for users, except to quit the service.

Yet another clause bluntly stated that Instagram can use user content for advertising, or other commercial purposes without having to compensate users. This means that if a user clicks a picture during a family outing at a restaurant, and uploads it, Instagram can sell the picture to the restaurant and allow them to advertise. Of course, the user has no stakes in the revenue.

Understandably, users were irked. The more high profile users actually withdrew from the service: for instance, National Geographic stopped its uploads.

Instagram acted swiftly. It attributed the confusion to the “language” used in the document. In fact, Kevin Systrom, co-founder of Instagram, in an official blog post, clarified that Instagram will revert to its old advertising policies, until they come up with a more acceptable policy document.

But has the damage already been done? Has a cool and very popular idea been killed by a bad policy move?

Inside Instagram

Instagram is one of those many Internet success stories, where a cool idea was coded into an application or a platform, and it went viral. Released first in the App Store for Apple’s iOS devices in late 2010, and in early 2012 for Android platform, Instagram gained popularity amongst smartphone users. With features such as ‘following’ and hash-tagging, it has evolved into a photo version of Twitter, with a growing number of hundred million users.

Technology-wise, Instagram is a light application coded around the Python programming language framework. It runs on smartphones and offers features such as image cropping and digital filters. Digital filtering options provided by Instagram such as Lo-Fi, Inkwell and Kelvin, actually tinker with the photos rendering quick effects. It is a free to download application, and the service on their platform also comes for free. In its current avatar, Instagram earns money by displaying ads on their service platform, much like Facebook and Gmail.

No surprises

The policy move from Facebook comes as no surprise and is quick on the heels of its u-turn on allowing users to vote on privacy policies and user terms.

Business models in free-to-subscribe services such as Facebook and Gmail are strictly about advertising. Though even Gmail has, in the past, drawn flak for perhaps seeming too invasive, no service has ever made a direct attempt to transfer licence of user data without compensating users.

Existing models have more or less revolved around displaying targeted ads. Creative content like blogs and photos are handled differently by different players — Google displays ads and shares a portion of its revenue with users using elaborate features such as AdSense.