• by Steve Smith , Staff Writer @popeyesm, December 19, 2012

Understanding that "free" interactive services have to extract some marketing value from their users is one thing. But Instagram’s bizarre interaction yesterday with its community of users-cum-content providers is a case study, by turns, in hubris, tone-deafness, poor communications skills, a breakdown in social media etiquette and just bad manners. And within a day it transformed into a real-time mea culpa.

As much of the digerati already know, Instagram announced at its company blog a change in Terms of Service that seemed to bluntly state that the company had the right to use your images in advertising. To be clear, there is nothing especially clear about how in fact Instagram plans to do this. In part, the controversy was rife with speculation. But Instagram started it with a stark declaration of corporate over personal rights.

“Instagram does not claim ownership of any Content that you post on or through the Service. Instead, 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 on or through the Service, except that you can control who can view certain of your Content and activities on the Service as described in the Service's Privacy Policy, available here.”

I still don’t quite get whether the second part of that last sentence actually has bearing on images you post that might get used in a promotion. Are privacy choices respected by the ad policy?

But the part that really seemed to hack people off involved the breadth of the data that could be shared with an advertiser and the clear declaration that users had no claim on the value of images they themselves had created.

“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.”

First and foremost -- never, ever send users into a privacy policy and TOC with no explanation. The original dumbass blog post at Instagram simply says: “We know these documents are a little dry, but they’re very important. Please take a moment to read through them so you keep feeling comfortable sharing your beautiful photos on Instagram.”

Worse, the most controversial aspects of the TOC were not even addressed in the blog post’s rundown of “key updates.” It feels like misdirection.

How does this affect celebrity Instagram users? Can their images be used however the company wants?

And perhaps most damning of all, Instagram put its notice that affects all users on the Web site in a company blog, not where it belongs -- in the damned app where people use it.

We can argue all day about the fair exchange of value for a free service, and whether Instagram is doing anything different here from its parent company, Facebook. But their way of relating this to users in tone, lack of clarity and method was disrespectful. Instagram deserved the scorn, even if fleeting, it received this week. Finally late yesterday, co-founder Kevin Systrom issued something closer to the explanation that users deserved from the start. See separate story at Mobile Marketing Daily today for details.

It remains to be seen whether real-time screw-ups and apologies ultimately have a positive or negative effect on the image of a mobile service like Instagram. We all understand the modern Internet method of iterating, gathering feedback and reiterating. This applies to product features and Web sites. But does it really apply to core values such as valuing and respecting users?