Yesterday, I wrote on the potential lawsuits that could come as a result of Facebook’s (NASDAQ:FB) acquisition of Instagram back in April for $1 billion. Some believe that Twitter could make a case for the alleged “verbal agreement” that Instagram CEO Kevin Systrom made for a $525 million buyout offer from Twitter.
Today, a new report came out stating that Instagram will now use photos from user’s accounts, without telling them or compensating, for the purpose of using them as ads for Facebook. The company said that this new policy will begin on January 16, 2013. Unfortunately for users of the popular photo sharing site, Instagram has made this new policy very clear in their revised terms of service and there is no way out.
Here is the revised terms of service that was recently added to the site:
“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” (Orlando Sentinel).
It appears the only way to escape the new terms is to delete your account and potentially lose all your photos that are on your account.
Facebook has come under fire various times for lack of security on the site. Critics often point out that anyone could view your Facebook account despite the security features of the site. After this move with Instagram, I would be surprised if we don’t see some resistance from users who now could have their pictures taken from the site and used as ads that generate revenue for Facebook.
Keep in mind that Facebook is finally starting to look good in Wall Street’s eyes for its growth potential in the ad business. Additionally, the company’s very poor year has caused them to continue pushing innovation and profit maximization.
Analysts see 2013 as a good year for Facebook. The social networking site has a forward price to earnings ratio of 42.63 (better than the current p/e of 252) and earnings are expected to rise 27.5% next year. This has lead analysts to give an overall “buy” rating for the stock right now. However, I would not be so fast to just assume Facebook will experience a breakout year. I still need to wait and see if there will be any fall out from the Twitter bid on Instagram and this latest photo sharing debacle.
The bottom line here is I would be weary of the potential consequences of this latest development for Facebook. If you are an Instagram user, it is time to contemplate whether or not you mind the site sharing your photos to use as ads. Overall, analysts see Facebook’s momentum continuing as the ad business continues to provide growth. Whether or not the social networking site will be able to meet those estimates we will have to wait and see.
Disclosure: None
