Instagram Loses Half Its Daily Users In A Month, And Here's Why [REPORT]

Instagram scared off a lot of users back in December when it decided to update its original terms of service for 2013. Even though the company reneged on its new terms after a week of solid backlash, Instagram users are still fleeing the photo-sharing app in troves.

According to data provided by app traffic company AppStats, Instagram has lost roughly half of all its active users in the month since proposing to change its original Privacy Policy and Terms of Service. In mid-December, Instagram boasted about 16.3 million daily active users; as of Jan. 14, Instagram only has about 7.6 million daily users.

However, all's not lost for Instagram. Data shows that the popular photo-sharing app continues to gain monthly active users -- this could signal increased competition in the marketplace, or momentum taking its toll -- but unfortunately for Instagram, monthly users, by definition, post less often than daily users.

For those unfamiliar to Instagram's proposed amendment to its Terms of Service -- set to go into effect on Jan. 16, 2013 -- Instagram had originally granted itself licensing rights to sell any and all photographs taken by the app, particularly to Facebook. Even though Instagram still wouldn't "own" your photos, it would be able to license your images to third-parties, including its parent company Facebook.

Here was one particular passage that ruffled many feathers:

"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."

Users could have set restrictions on which of their photos are seen on the service, but that's only within Instagram; there was no guarantee that your Instagrams would be used elsewhere, like in a Facebook advertisement.

"Our updated privacy policy helps Instagram function more easily as part of Facebook by being able to share info between the two groups," Instagram wrote in a blog post about the changes. "This means we can do things like fight spam more effectively, detect system and reliability problems more quickly, and build better features for everyone by understanding how Instagram is used."

That was the public reason offered by Instagram; buried within its new Terms of Service, however, there was another reason:

"Some or all of the Service may be supported by advertising revenue," Instagram writes. "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."

So to summarize briefly: Instagram's old ToS said the company could place advertisements within the site and alongside people's photographs; the new ToS said it could use your photos as advertisements, without a single cent owed to you.

Mind you, Instagram was quick to plug the leak. Founder Kevin Systrom was wise to address the concerns and update his company's Privacy Policy and Terms of Service appropriately, but the scare wasn't only shady, but it clearly left a bad taste in users' mouths. 

Instagram may be taking a bigger hit in the UK, where fears of privacy are made worse by the proposed Coalition's Business Enterprise Regulatory Reform Bill (BERR), which seeks to essentially take your images -- your "property" -- and use it for commercial purposes, thanks to an "extended collective licensing" agreement that can allow entire classes of work to be commercially exploited.

Instagram may not want to get involved with overseas matters -- plenty of regulators in the UK, US and elsewhere will have something to say about BERR before it can be signed into a law -- but Instagram and apps like it are certainly suffering from companies trying to exploit the vague copyright laws on the Internet.

Assuming the data from AppStats is accurate, Instagram may want to pursue another campaign to bring users back to the service. Losing more than 7 million users isn't just a minor hiccup; this has the makings of a PR disaster, and could be the company's biggest test ever. Instagram has Facebook to support it, but it's going to need more than mere support to win back the hearts and trust of its user base.

Moving forward, Instagram needs to find a better way to make users feel acknowledged and welcomed on its platform. Most Instagram users likely signed up to express themselves, not sell themselves; after a brief scare, Instagram needs to do right by its users, lest they risk losing them all.