On Tuesday, Facebook Inc.'s Instagram was caught in an Internet uproar over -new- terms of -use- for its photo-sharing service. After hours of irate customer reaction, Instagram clarified its approach, saying -that- it would not—as -use-rs feared—sell photos or -use- them in advertising.
But the terms reflect a deeper-seated change at Facebook -and- in the commercialization of the social Internet. Facebook is pushing to churn profits from Instagram, which had no revenue when it agreed to an April purchase for roughly $1 billion.
-and- to do so, it is heightening a rivalry with Twitter Inc., which was once the primary venue for sharing Instagram's stylized photos online. In recent months, the two have been increasingly at odds over their technology, strategy -and- now competition for mobile advertisers.
Last week, Instagram disabled a feature -that- allowed its -use-rs to post their photos directly into Twitter. Instagram said it wanted its members to -use- its own online services. Twitter quickly struck back, announcing -new- digital image "filters" for its own photo-posting features. The filters, which are similar to those on Instagram, allow people to make over smartphone snapshots in black -and- white or in movie-style looks.
Instagram has quickly become a formidable threat to Twitter. In August, Instagram reached 7.3 million daily active -use-rs, exceeding Twitter's 6.87 million for the first time, according to comScore.
Since then, the gap has widened. Last month, Instagram had 17% more daily active -use-rs than Twitter, according to comScore data. On average -use-rs spent 321 minutes on Instagram in November, versus 146 minutes on Twitter, according to comScore.
Twitter on Tuesday said there are more than 200 million people who log onto the service at least once a month. Instagram doesn't disclose its monthly active -use-rs, but Facebook said Instagram has more than 100 million registered -use-rs.
"Increasingly, these companies compete head to head as they chase the revenue associatedwith social media channels on mobile," said Julie Ask, an analyst at Forrester Research. Spokespeople for Facebook -and- Twitter declined to comment on the relationship between the two companies.
The chumminess between Instagram -and- Twitter has been unraveling since Twitter rival Facebook announced it was acquiring Instagram in April. Twitter, whose co-founder Jack Dorsey was an early investor in Instagram, had also sought to buy Instagram, people familiar with the acquisition negotiations have said.
In August, some Twitter officials were surprised by Instagram Chief Executive Kevin Systrom's answers to California regulators reviewing Instagram's sale to Facebook, according to people familiar with the conversations.
At the regulatory hearing, Mr. Systrom said Instagram hadn't received formal takeover offers or term sheets from anyone besides Facebook, though he said Instagram had "talked to other parties."
A spokesman for the California Department of Corporations said the agency hasn't received any complaints or protests over the hearing.
Now Twitter -and- Instagram, both of which are primarily -use-d on mobile devices, will likely jockey for the same advertisers.
It is unclear what Instagram ads will look like. On Instagram's blog, Mr. Systrom said the company is still planning to experiment with ad products, but he said one type of ad could promote the accounts of br-and-s -that- a -use-r's friends are following.
-that- type of ad would be somewhat similar to Twitter's Promoted Accounts, which appear throughout the site -and- encourage -use-rs to follow relevant br-and-s. A financial--new-s website, for example, can buy a Twitter ad -that- suggests like-minded -use-rs—people who follow the Twitter accounts of banks or financial executives, for example—to follow the account of -that- website.
Twitter also sells "promoted tweets," which are tweets -that- advertisers pay to reach a wide group of -use-rs. In these cases, advertisers only pay Twitter when a -use-r clicks on the ad, follows the suggested account or interacts with the ad in some other way. The advertiser in advance enters a bid in a computerized auction -that- lays out how much the advertiser is willing to people for each click from Twitter -use-rs.
Blake Tedeschi, digital communications manager for dog-toy company Nylabone, said people on Instagram have shared -and- tagged more than 1,000 photos of dogs using the company's products, without Nylabone doing much to encourage the -use-r images.
Now Twitter -and- Instagram, both of which are primarily -use-d on mobile devices, will likely jockey for the same advertisers.
It is unclear what Instagram ads will look like. On Instagram's blog, Mr. Systrom said the company is still planning to experiment with ad products, but he said one type of ad could promote the accounts of br-and-s -that- a -use-r's friends are following.
-that- type of ad would be somewhat similar to Twitter's Promoted Accounts, which appear throughout the site -and- encourage -use-rs to follow relevant br-and-s. A financial--new-s website, for example, can buy a Twitter ad -that- suggests like-minded -use-rs—people who follow the Twitter accounts of banks or financial executives, for example—to follow the account of -that- website.
Twitter also sells "promoted tweets," which are tweets -that- advertisers pay to reach a wide group of -use-rs. In these cases, advertisers only pay Twitter when a -use-r clicks on the ad, follows the suggested account or interacts with the ad in some other way. The advertiser in advance enters a bid in a computerized auction -that- lays out how much the advertiser is willing to people for each click from Twitter -use-rs.
Blake Tedeschi, digital communications manager for dog-toy company Nylabone, said people on Instagram have shared -and- tagged more than 1,000 photos of dogs using the company's products, without Nylabone doing much to encourage the -use-r images. "If they (Instagram) did offer advertising, it's something absolutely we would look into," Mr. Tedeschi said. Nylabone, owned by Central Garden & Pet Co., already pays to promote marketing messages on Facebook, Twitter -and- Google Inc.'s YouTube.
Mr. Tedeschi said if Nylabone advertises on Instagram, the spending isn't likely to replace ad dollars the company spends on Twitter or other digital services, at least initially.
"At the end of the day it will come down to whatever offers the best results," Mr. Tedeschi said.
While it isn't surprising -that- Instagram is laying the foundation for a moneymaking business, its ambitions run the risk of alienating its fans.
On Monday -and- Tuesday, Instagram -use-rs flocked to Twitter -and- to Instagram's Facebook page to air their grievances over the -new- terms of service. Even celebrity Instagram -use-rs such as actress Tiffani Thiessen said they were planning to close their accounts. National Geographic said Tuesday on Instagram -that- it would suspend -new- posts beca-use- it was concerned about "the direction of the proposed -new- terms."
One member, who identified herself as Marcella Makaev addressed Facebook CEO Mark Zuckerberg, asking him: "Mr. Zuckerberg, don't you earn enough money with Facebook?"
Late Tuesday, Instagram scaled back its terms of service, which go into effect next month.
In a blog post, Mr. Systrom announced the company was tweaking the language of the policy to make it clear -that- Instagram would not sell -use-rs' photos.
He also said he would remove language -that- implied -that- -use-rs' photos could be part of advertisements.
Still, Mr. Systrom reminded -use-rs -that- Instagram was designed to ultimately make money: "From the start, Instagram was created to become a business."
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