Today: Apple (AAPL) and Samsung pull down the heat in their global battle a bit, but report on smartphone shipments shows the stakes. Also: Instagram faces uprising for changing terms of service, Wall Street continues to rise on "fiscal cliff" hopes, and Oracle's (ORCL) earnings a success.
Instagram's new terms of service cause uproar, company seeks to calm users
Instagram was the target for user ire on Tuesday, as consumers openly quit the photo-focused social network in response to a terms of service update that more explicitly spelled out the company's rights to use content shared on the service for advertising. Much of the hubbub was a result of users incorrectly deciphering the company's language in its updated regulations, and Instagram eventually released a blog post seeking ti quell the storm.
The Facebook-owned app updated its regulations Monday, aligning them with the Menlo Park social network that committed a $1 billion purchase price for the mobile app earlier this year. One part of the Terms of Service, however, caught the eye of users: "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."
Users openly revolted as word spread that Instagram was claiming ownership of users' photos, or was looking to sell them, or other nefarious acts. In actuality, Instagram was just lining up to do exactly what Facebook does for advertising purposes -- upon visiting Facebook, users are typically greeted with a "Sponsored Story" that includes a friend's profile picture and an entity that friend has liked, i.e. Macy's or Urban Outfitters, along with an advertisement for that entity.
Posting a photo on Instagram is granting it a license for limited use, the Terms of Service says, and similar language is used in the regulations of most social networks, such as Google (GOOG)+ and TwitPic, a Twitter service, as the Washington Post points out. The entire move to update Instagram's terms of service was part of a calculated effort by Facebook to make the two companies' regulations compatible, as had been reported for weeks, and Facebook has similar language.
After a day full of Instagram users quitting the social network and advertising that fact on other social networks such as Twitter, Instagram cofounder and CEO Kevin Systrom offered a blog post that clarified the company's move.
"Our intention in updating the terms was to communicate that we'd like to experiment with innovative advertising that feels appropriate on Instagram. Instead it was interpreted by many that we were going to sell your photos to others without any compensation. This is not true and it is our mistake that this language is confusing. To be clear: it is not our intention to sell your photos," Systrom wrote, adding that user photos would not be included in advertising beyond profile pictures.
The Instagram revolt comes at a sensitive time for the company, as it seeks to begin monetizing the service to justify the price tag Facebook was willing to pay, while tough competition emerges from former partner Twitter and Yahoo's (YHOO) Flickr. The company has yet to begin advertising on its mobile app or new website, but Systrom said earlier this month that that time is near.
"Even from the beginning when we started Instagram, we realized we had to build an independent business, and even within Facebook, we realize we still have to contribute to the business," Systrom said in an interview with Reuters TV.
Just as with other social networks, privacy advocates will keep its eyes on Instagram to ensure that users' rights are protected.
"These services are publicly advertised as 'free,' but the free label masks costs to privacy, which include the responsibility of monitoring how these companies sell data, and even how they change policies over time," Chris Hoofnagle, director of Information Privacy Programs at the Berkeley Center for Law & Technology, told The Associated Press on Tuesday.
Facebook stock gained 3.6 percent on the day to close at $27.71.
Apple, Samsung products will not be banned as companies dominate smartphone market
Apple and Samsung's global courtroom fight seemingly will not lead to bans of either company's popular mobile products, a relief for consumers, but the stakes of the electronics companies' battle was noted Tuesday as a research firm reported they made nearly half of all the smartphones shipped to retailers in 2012.
Late Monday, Judge Lucy Koh -- who oversaw the U.S. portion of the companies' patent battle in her San Jose courtroom -- ruled against Apple's request for an injunction that would have kept some Samsung smartphones and tablets from being sold in the United States.
"The potential for future disruption to consumers would be significantly greater if this court were to issue an injunction, and such disruption cannot be justified," Koh said.
Samsung followed that ruling Tuesday by dropping requests for bans on Apple products in several European countries, though the battles for compensation from Apple for patent infringement will continue.
"We strongly believe it is better when companies compete fairly in the marketplace, rather than in court," Samsung said in a statement.
These rulings, while good for consumers, do not mean an end to the fight, however.
"There's not going to be any knockout punches between these two competitors," Yankee Group analyst Carl Howe told Bloomberg News. "Injunctions can be knockouts. This is going to be a war of money."
That war was spelled out by IHS in a Tuesday report that showed Apple and Samsung owned nearly half of the smartphone market, with Samsung pulling away from the Cupertino tech giant in terms of market share. Samsung shipped 28 percent of smartphones in 2012, the report said, while Apple owned 20 percent of the market. In 2011, Samsung claimed 20 percent of the market while Apple claimed 19 percent.
Apple's volatile stock price continued to rebound strongly Tuesday, gaining 2.9 percent to close at $533.90, putting the company back in the $500 billion club with a market cap of $502.2 billion.
Wall Street grows on 'fiscal cliff' hopes, Oracle beats earnings expectations
For the second consecutive day, a positive spike in Apple stock and hopes for a resolution to the "fiscal cliff" combined to send Wall Street soaring higher, led by technology stocks.
Republican House leader John Boehner floated a "Plan B" to replace the tax hikes and spending cuts set to happen in the new year, but the White House and even members of his own party were unimpressed, pushing the sides toward a negotiated compromise they seemed close to Monday.
With hopes for a deal rising, so did stocks: The tech-heavy Nasdaq gained 1.5 percent on the day to lead the three major U.S. stock indexes, with the S&P increasing 1.2 percent and Dow moving up 0.9 percent. The SV150 index of Silicon Valley's largest technology companies performed stronger, gaining 1.7 percent.
Redwood City software giant Oracle gained 1.7 percent even before announcing its earnings after the bell; when the company showed investors that its efforts to move into cloud computing had paid off with higher than expected profits, shares pushed even higher, gaining another 1.7 percent. Other valley cloud software companies moved higher on Tuesday as well, with Workday increasing 4.8 percent and Palo Alto's Jive Software growing 5.7 percent.
Cisco (CSCO) increased 1.4 percent as it acquired a Denver company for an undisclosed amount, and chip companies also had a strong day: Intel (INTC) increased 1.9 percent a day after announcing a breakthrough, and competitor Advanced Micro Devices grew 2.4 percent.
Silicon Valley tech stocks
The tech-heavy Nasdaq composite index: Up 43.93, or 1.46 percent, to 3,054.53
The blue chip Dow Jones industrial average: Up 115.57, or 0.87 percent, to 13,350.96
And the widely watched Standard & Poor's 500 index: Up 16.43, or 1.15 percent, to 1,446.79
Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.