San Francisco Chronicle - (Sunday)
Instagram tightrope
Facebook’s privacy problems could cloud app’s direct purchase ambitions
Instagram sent shudders through the retail industry when it announced a feature that lets its billion users buy products directly in its app. But its sales ambitions could be hampered by parent company Facebook’s clumsy handling of user data and privacy.
The photo-sharing service has been experimenting with e-commerce for more than a year. Users scrolling through posts have been able to click on a product tag, which reroutes them to a company’s website to finish the purchase.
Now, people can buy things without leaving Instagram — an innovation that makes things easy for users but raises concerns about the security and sharing of people’s data given the rocky history of Facebook, which bought Instagram for $1 billion in 2012.
“The ultimate question is, do you as a consumer trust Instagram enough to hand over your credit card information?” said Jason Goldberg, chief commerce strategy officer at Publicis, a marketing and ad agency in Chicago.
Instagram started its in-app checkout feature in March by partnering with 23 companies, including Nike, Warby Parker, Uniqlo, Zara and social media star Kylie Jenner’s Kylie Cosmetics. Most now offer options to buy products on the app directly, with Instagram storing payment and shipping information for the customer.
A spokeswoman for Instagram said payment information stored in the app’s checkout feature cannot be accessed by Facebook, but she declined to comment on the sharing of other user data such as age, gender, geography and buying habits. For businesses, she said, Instagram is “making it as easy as possible by having a shared infrastructure such as product catalogs to power commerce across the Facebook family of apps.”
San Franciscan Carlina Harris isn’t worried about her personal information being stored on Instagram. She has 13,000 followers and spends a substan
tial amount of time on the app, and she embraces what she sees as just another avenue for shopping.
“I bought a floppy hat through an ad that was targeted to me on Instagram,” she said. “It makes me happy that it’s easier to buy on the app itself.”
Still, all it takes is one gaffe to raise privacy worries. For Facebook, a 2007 experiment with tying shopping to a software feature known as Beacon caused an uproar as it inadvertently revealed purchases, like the time it broadcast a user’s purchase of a ring for his wife before Christmas. Facebook killed the feature in 2009 and settled a related lawsuit for $9.5 million.
More recently, scrutiny of Facebook’s data practices ramped up after the revelation that the political consulting firm Cambridge Analytica, which had ties to Donald Trump’s presidential campaign, had obtained information from the profiles of tens of millions of users. The miscues have only mounted. This month, Facebook faced questions over storing millions of user passwords in plain text for years.
Instagram co-founders Kevin Systrom and Mike Krieger left the company last fall amid growing tensions with Facebook CEO Mark Zuckerberg over the direction of the photo app, which they feared was losing its independence and subject to too much control by Facebook and Zuckerberg.
Retailers, wary of their experiences with the likes of Amazon and Google, may have other concerns beyond data privacy. If consumer behavior shifts and people become more comfortable buying on Instagram, companies will have to contend with the loss of control in interactions they have with their customers, said Alexa Tonner, co-founder of Collectively, a marketing agency in San Francisco whose clients include Old Navy and Uber.
If Instagram essentially becomes a digital storefront, the size of its reach “could be scary.”
“I think in general there’s excitement tinged with a bit of worry,” Tonner said.
Other hurdles exist. Users can now buy only one item at a time, which can irritate those who may want more than one product per transaction and may make shipping costs relatively high for businesses. The app also has no reviews or ratings, tools consumers typically look to when shopping online.
Such issues can be easily fixed, though, and Instagram’s reach is huge and growing quickly. Of its billion users, about 130 million already tap to find product tags in shopping posts each month. That’s an increase of 40 million since September, around the time a new shopping feature arrived on the app’s Explore tab, which categorizes photos and videos under different topics.
Instagram’s closest photodriven competitor that has been experimenting with ecommerce is Pinterest. The company, expected to go public this year, had a feature called “buyable pins,” which let customers purchase products without leaving the site. It did away with that feature in October in favor of pins that direct people to retailers’ websites — the opposite of what Instagram is trying to do.
Pinterest could compete with Instagram for retailers’ attention, especially if sellers decide they favor an approach that gives them more control over the checkout process. The company recently hired a Walmart.com executive, Jeremy King, who previously worked at eBay, though it’s not clear whether his hiring signaled deeper ambitions in e-commerce or just a desire to beef up the company’s management ahead of its initial public offering.
The biggest test for Instagram may be whether it can persuade users to shop, not just fantasize about products.
“It makes sense that Instagram went down this path,” Goldberg said. “Whether it becomes a giant e-commerce force remains to be seen.”
“Do you as a consumer trust Instagram enough to hand over your credit card information?”
Jason Goldberg, Publicis