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Instagram lost 25% of its daily users after term of service debacle? Not so fast

Dan Graziano
December 28th, 2012 at 12:45 PM
Instagram Terms Of Service

Following Facebook’s $1 billion acquisition of Instagram in April, the popular photo sharing application grew more than 1,100% over the next six months. In looking to better monetize the service, Facebook (FB) updated its terms to help bring in new advertisers, however many users feared Facebook may be looking to sell or license their personal photos without their consent. The story spread like wildfire, panic ensued, some people deleted their accountsInstagram CEO Kevin Systrom eventually apologized, and the company reverted to its older terms of service. But was it already too late?

In the aftermath of the terms of service fiasco, the company was slapped with a class action lawsuit and hit with a flurry of bad press. The debacle may have been even worse than the media and Wall Street previously expected, though. According to recently released figures from AppData, Instagram may have shed nearly a quarter of its daily active users in the wake of the terms of service disaster.

“[We are] pretty sure the decline in Instagram users was due to the terms of service announcement,” the firm AppData said to The New York Post.

Instagram peaked at 16.4 million active daily users the week of its policy change, as measured by the number of users who log into Instagram with their Facebook accounts. By Christmas, the firm found that the service had fallen to 12.4 million daily active users. Instagram previously flourished during holidays, with roughly 14.5 million daily active users sharing some 10 million photos on Thanksgiving alone.

Shares of Facebook have reacted negatively to the news and have fallen nearly 3% on the day to $25.47 per share. Business news publication Quartz claims that “the Post is flat-out wrong,” however, and that the data is misleading.

Quartz senior editor Zachary Seward notes that because many users have not connected their Instagram accounts to their Facebook accounts, AppData’s data cannot be interpreted as a 25% reduction in daily active users because “it’s only talking about a subset of Instagram users.”

AppData’s daily active user claims are further called into question by the fact that its own data shows an increase in weekly active users for the week ending December 28th.

Instagram may have lost some users as a result of this fiasco, but the claim that it lost a quarter of its users is probably way off base.

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