5 Lessons From the Instagram Debacle

Remember all the way back on Tuesday, when everyone and their artistically-filtered dog was freaking out about Instagram's new privacy policy? How long ago that seems, now that co-founder Kevin Systrom (above) has walked back the notion that your photos are potentially going to be used in ads. We're cool now, right?

Actually, the jury is still out on this one. Systrom's promised rewording of the agreement has yet to arrive, and prominent users are still skeptical. In the meantime, the story so far reads like a textbook case of what startups shouldn't do to get ahead. Here's what we learned:

Turns Out, There Is Some Scrutiny of Your TOS

Nobody reads the Terms of Service (TOS), right? It's an incredibly boring, multi-page legal snoozefest that no user bothers with in this day and age. We scroll to the bottom, click accept, and do whatever else we need to do to start using the service.

That wasn't the case with Instagram, however. Why not?

Because the service is relatively new and much loved by its users, who still consider it too good to be true. Because Facebook just purchased the company, and Facebook is eager for more revenue streams and has a history of pushing its privacy policy to the extremes of user acceptability. Because it was a slow news week; tech journalists had time to actually dig in to the details.

They didn't need to dig too deep, either. The language in the most controversial section of the TOS -- "You agree that a business or other entity may pay us to display your username, likeness, photos" -- is actually pretty clear, contrary to what Instagram and its cheerleaders later claimed. You don't need a law degree to read that sentence.

So the lesson is to obfuscate your TOS more? No, the lesson is that a TOS is no place to hide in the social media age. Transparency is all.

Don't Take Your Users Where They're Not Ready to Go

Instagram celebrated its second birthday in October. Even in the hyperfast tech world, that's the blink of an eye. It may have more than 100 million users, but don't let that fool you into thinking it has been around long enough for us to trust it implicitly.

Two year-olds need to take baby steps lest they crash into things, and the same is true of two year-old companies. When Facebook was two, in 2006, advertising was the last thing on its mind. Zuckerberg was quite clear about this: you build the service first, on a planet-wide scale. Only then do you worry about making money on it.

Twice in the past week, Systrom fundamentally misread what his users want, the first being the utterly unnecessary war with Twitter. Nobody was calling on him to change the privacy policy, either. Integrating the service further into Facebook is a nice goal, but it could have waited.

YouTube's largely independent relationship with Google, and slow-and-steady advertising roll-out, should have been the model here. Grow the service further, make sure your hundred million users are solid, then start a conversation around where you need to be to make money and what that should look like.

Any more unforced errors like this, and we're going to start to wonder if this is one of those cases where the founder is better off stepping back from his baby after its acquisition.

Don't Be Arrogant

That blog post on Tuesday may have quelled some of the outrage, but in some ways the Instagram founder dug himself in deeper. Some of the wording was borderline condescending: "many users are confused ... legal documents are easy to misinterpret."

That kind of tone isn't likely to endear you to consumers, even when you surround it with the language of "listening." And especially when you are actually going to change those legal documents.

Another sign of arrogance: the "my way or the highway" nature of the privacy policy -- something which apparently won't change in the revamped version. If you don't like them, your only recourse is to delete your account. Parent company Facebook was forced to let users opt out of Sponsored Stories after a $20 million class-action lawsuit; you'd think Instagram would learn from that experience.

When You're Wrong, Make a Real Apology

Systrom did say he would remove some of the wording around the use of Instagram images in ads. (We're still waiting to see the new wording.) This was clearly a backtrack, and the tech press immediately and unanimously identified it as such.

Yet Systrom presented it as if it were merely a clarification. Instagram never intended to do such a thing, he wrote, so the wording that suggested it would was going to be removed. That just doesn't smell right.

In the highly litigious U.S., we know -- even if we're not lawyers ourselves -- that hundreds of billable hours are spent crafting legal documents. Every last sentence is there for a reason, especially if it's something as vital as the TOS, the primary contract between company and customer. Someone in Systrom's position is going to have to sign off on each word.

If you release a contract and then delete an important component of those terms when the other party complains, it means you messed up. You're changing something substantive about the service you're providing, not just the wording. We all know that. Admit as much, and you'll go a long way towards rebuilding trust.

Keep Your Power Users Sweet

Hours after Systrom's non-apology apology, the National Geographic Instagram account announced it would be going dark -- a major blow for its 650,000 followers, and for a service that's all about photography.

True, few amateur photogs on the service have achieved the quality of pictures on display at the @NatGeo account. But it was something to aspire to, a tent pole account for the service; its absence sends a chill through the community. Suddenly, it was clear this was no tempest in a teacup. If the nation's oldest photographic magazine is this concerned about the new privacy policy, maybe you should be too.

This is how an exodus really starts -- not with the grassroots users of a service, but with the power users, the luminaries, the most respected and widely-followed accounts. Like it or not, it's human nature that they set the tone and the trends. If I was Systrom, I would have booked a trip to National Geographic's offices the moment I saw that ominous dark Instagram.

What else should Instagram do to repair its relationship with users? Let us know in the comments.