Abstract
This research paper aims to investigate the consequences of Instagram’s filtration on small and medium-sized businesses in Iran. It does so by conducting interviews with nine such businesses affected by the Islamic Republic’s decision to restrict access to Instagram starting September 21, 2022. This action introduced several challenges that have jeopardized the economic sustainability of these enterprises.
Additionally, this paper examines the repercussions of the Islamic Republic’s sudden and unannounced decisions to filter international platforms and the disruption of internet services on these enterprises. It starts by exploring the significance of small and medium businesses in both the global and Iranian economies, followed by an analysis of the role of the internet and popular international platforms like Instagram in their development and growth.
The subsequent sections provide a detailed analysis of the findings, as seen through the perspectives of the executives of these companies, to assess how the filtering of Instagram has influenced their economic condition.
Introduction
Small and medium enterprises (SMEs) constitute a crucial economic sector in any country. These businesses, primarily private, are fundamental in wealth creation, poverty reduction, and lowering unemployment rates. SMEs are typically comprised of online stores, service companies, workshops, and small manufacturing units.
Various definitions exist for these economic entities. For instance, the European Commission in 2005 classified businesses with fewer than 250 employees and an annual revenue of less than 50 million euros as SMEs.
However, in Iran, there is no unified definition of SMEs, with different economic regulatory bodies having their definitions. For example, the Ministry of Industries and Mines and the Ministry of Agricultural Jihad define SMEs as businesses with fewer than 50 employees, whereas the Central Bank of Iran limits this classification to institutions with less than ten employees.
The absence of a clear definition for SMEs in Iran reflects the government’s lack of prioritization and special attention to these entities. This contrasts with developed or more developed countries like Germany, the USA, and China, where governments recognize the importance of SMEs and are finding ways to facilitate their operations and encourage community engagement in starting such businesses.
To better understand the importance of SMEs, we review statistics presented by Shahrooz Zargarian, who conducted the study titled “European Small and Medium Enterprises and their Current Situation in Iran” for the Energy and Environment Commission of the Tehran Chamber of Commerce during its twentieth session.
Drawing from World Bank data and the findings of this study, it’s evident that SMEs form the backbone of the global economy, representing over 90% of all business entities and providing roughly half of all private sector jobs. These entities represent 90% of businesses in Asia, employing about one billion people and contributing around 11 trillion dollars to these countries’ economies. SMEs account for 40% of the GDP in developing countries.
According to the same statistics, 70% of employment opportunities and 50% of the Gross Domestic Product (GDP) in the Iranian economy are dependent on SMEs. However, while these businesses generate over 50% of the European Union’s economic added value, this figure is only 16.8% in Iran. Despite the emphasis on expanding and growing these types of businesses in Iran’s fourth and fifth development plans, it appears that due to incorrect government policies, these policies have not achieved their intended goals, and SMEs in Iran easily fail.
The era of technology and digital transformation has significantly impacted these companies, creating opportunities for growth through increased competitive advantage and reduced costs. Therefore, encouraging and supporting these companies to digitize reduces their likelihood of failure. One of the steps towards digitalization is the use of social networks.
Today, the use of social networks among SMEs is growing. Social networks assist businesses in marketing, sales, gathering, and sharing information about products and services in new and effective ways.
Social networks also facilitate customer relationship management and service provision while reducing marketing and customer communication costs. Additionally, they enable these businesses to have easier access to customer and competitor information. SMEs face financial resource constraints; thus, social networks offer a profitable opportunity for marketing activities. Instagram is one of the social media platforms enabling these businesses to reach their target groups and potential customers through visual content such as photos and videos.
Among social networks and internet platforms, Instagram, with its penetration rate and the number of Iranian users, holds a special place for SMEs in marketing and establishing direct and effective communication with customers.
Instagram was one of the few popular global platforms not filtered in Iran until 2022. Before platforms like Twitter, Telegram, YouTube, etc., were filtered by the Islamic Republic. According to Padro Website, a service provider for product shipment and sales, approximately 630,000 active online stores existed before September 2022 and the start of the “Women, Life, Freedom” protests across Iran. Padro’s statistics are significant because, as an Iranian smart platform for processing virtual business orders, it reported a decrease in online stores to 330,000 following Instagram’s filtering.
While initial speculations suggested that the filtering of Instagram might be temporary, authorities later announced that unblocking this social network would be postponed until the platform’s servers were transferred to Iran and an official representative was appointed. Given the governance structure and extralegal demands of the Islamic Republic’s governing bodies, there is little hope for lifting the filter on this social network in the near future.
Considering the importance and vulnerability of SMEs in Iran’s economy, this research paper aims to take a closer look at the outcome of Instagram’s filtering policy on Iran’s economy, referencing information obtained from interviews with decision-makers of nine small and medium economic enterprises that continue to use Instagram for selling, branding, and marketing their services or products.
Research Methodology
For the preparation of this report, a qualitative research method was employed. Accordingly, to gain a better understanding of the impact of Instagram’s filtering in Iran, interviews were conducted with nine managers, social media heads, or marketing directors of small and medium enterprises from December 7, 2023, to January 29, 2024. The industries of these randomly selected economic entities ranged from beekeeping, tourism, cosmetic products sales, two manufacturers of small decorative items, two workshops producing advertising products, as well as units specialized in car repairs and food product offerings. A common characteristic among these businesses was their central office location in the Tehran province. A uniform method and similar questions were utilized across all interviews. The aim of these questions was to better comprehend the status of these economic institutions following the social network Instagram’s filtering (questions are provided in the appendix).
Based on the responses obtained in this study, six of the economic enterprises were established before Instagram was filtered, and the other three were founded afterward. Among the interviewees for this research, only three individuals held their positions before Instagram’s filtering, while the others were employed by these economic enterprises after the filtering took place. However, all these individuals were knowledgeable about the impacts of filtering on their businesses.
These interviews were conducted with a commitment to maintaining the confidentiality of the interviewees’ identities and their companies. The purpose of this commitment was to ensure a secure environment for the interviewees during the interview and to prevent self-censorship due to potential consequences of discussing this research topic.
The interview questions were designed to gather information on the following aspects:
- The operational domain of these businesses
- Years of operation
- Marketing strategies
- Use of social networks for marketing
- Use or non-use of Instagram for marketing
- Objectives for using Instagram
- The impact of Instagram’s filtering on the company
- Current status of the company’s use of Instagram
- Access to unrestricted internet for Instagram usage
- Evaluation of these businesses’ preparedness in the event of complete internet access loss, considering the potential implementation of a national internet
- Awareness of government regulations regarding the use of social networks
- Familiarity and actions taken by these individuals to protest the internet situation and filtering in Iran
Findings
Familiarity with Marketing Strategies
Participants in the interviews revealed that aside from two economic entities solely relying on Instagram for their marketing activities, other businesses employed various methods alongside social media, particularly Instagram. These methods included using domestic Iranian platforms, SMS marketing, pyramid sales and marketing, direct customer engagement, and their company’s website for marketing purposes.
To better understand these businesses’ marketing strategies and the interviewees’ personal perspectives, two questions were asked: one about their preferred marketing strategy for their company, and another regarding their personal choice. The responses were not expected to be uniform or different. The predominant theme, highlighted by six of the respondents, was the value of direct and personal engagement with customers.
Subsequently, three of them highlighted the significance of using unfiltered online methods like websites and domestic platforms for marketing. Other methods mentioned included Instagram (by two businesses), advertisements (by two businesses), and enhancing quality for word-of-mouth promotion (also by two businesses).
Extent and Manner of Internet and Social Media Use
To better understand these businesses’ internet usage, a question was posed about whether they also sell their products online. If the answer was “yes,” they were asked what percentage of their sales were conducted online. Except for one vehicle repair business that used online platforms solely for branding, all other businesses utilized the internet for sales and marketing. The companies reported varying degrees of reliance on online sales: 100%, 98%, 60%, 50%, 40%, 20%, and 5%, with one company not specifying the extent but indicating that a significant portion of its sales were online due to the nature of its business.
When asked which platform was considered the best for marketing and selling products on social media, all but the vehicle repair business, which only used social networks for branding, named Instagram as their preferred platform. However, among these eight businesses, four also used domestic platforms for online sales in addition to Instagram.
Regarding why they used Instagram, all pointed to the platform’s large audience and the direct communication it enabled with customers. In addition to these common reasons, three businesses mentioned Instagram helped increase awareness about their field of operation and branding.
Businesses’ Assessment of the Economic Effects of Instagram Censorship
The impact of Instagram’s filtering on business operations was another topic explored. None of the participants reported a positive impact, except for the newly established vehicle service provider that had already focused its marketing on domestic platforms and found the filtering inconsequential. The other entities noted a negative impact, with “difficulty in operating through the Instagram platform” and “decrease in audience and customers” being the most frequently mentioned issues.
All these businesses resorted to using VPNs for accessing Instagram, a reliance that raises security concerns. Since they cannot easily purchase safe VPNs from authentic providers given U.S. banking sanctions on Iran, they are compelled to use domestic VPN services and free options, which may not always be secure.
Understanding of Rights and Protests Against Filtering Losses
With discussions around implementing a national internet to replace international access, potentially rendering VPNs ineffective, representatives from five businesses expressed having no alternative solution. Although two businesses considered their websites as an alternative, and one business contemplated using both its website and domestic platforms as a solution, only one company considered domestic platforms as a viable alternative.
None of these businesses had obtained the “E-namad” license required for legal online operation, nor were they aware of its necessity. Only one was in the process of obtaining this license.
Ultimately, none of these entities had taken legal action against the government for the losses incurred due to Instagram’s restriction. The decision-makers refrained from legal recourse due to perceived futility, fear of government retribution, and the absence of a strong, independent trade association to support them.
Data Analysis
The analysis of the data reveals that the filtering of Instagram has negatively impacted all small and medium-sized businesses (SMBs), with those still standing managing to mitigate these effects through alternative strategies. Furthermore, the data suggest that businesses that continued their operations post-Instagram filtering in Iran were either not dependent on Instagram or, if they were, managed to withstand the pressure through financial backing or alternative solutions.
Some businesses, due to their nature, do not rely on social networks for delivering their services or products, such as the vehicle service business that uses Instagram solely for branding purposes. On the other hand, some small or medium-sized businesses have maintained traditional marketing methods over the years or have a stable customer base.
Several businesses have considered alternatives to Instagram, including domestic platforms, official websites, and pyramid marketing strategies. Others, despite their high dependency on Instagram, have been able to bear the loss of customers and subsequent damages due to having financial support.
As a result, when discussing the most effective marketing strategy, the emphasis has shifted away from using Instagram to traditional in-person customer interaction, indicating a loss of trust among small and medium business owners in Iran towards using Instagram. However, decision-makers in these businesses have not surrendered to the complete elimination of internet and international social networks usage, with most continuing to conduct a portion of their sales through filtered international platforms in Iran, such as Instagram.
Even in this context, the impact of Instagram’s filtering on businesses that inherently require internet use, such as advertising companies or sellers of decorative products, is significantly greater than on businesses not dependent on the internet, like vehicle service companies.
In discussions about internet-based sales of goods or services, the majority of businesses prefer to use Instagram for its advantages and features. While other websites and local platforms are also utilized, Instagram is favored by these companies for its broad reach, direct customer interaction, and superior branding and product showcasing capabilities. Domestic platforms, due to issues like insecurity, lack of appeal, absence of audience, and numerous limitations, are not favored by the decision-makers of these businesses and are considered only as an option to escape “specific conditions.”
The implementation of filtering policies on Instagram by the Islamic Republic and the numerous problems it has created for business owners and their customers have led them to opt for VPNs as an alternative means of accessing Instagram. However, this has introduced challenges such as reduced internet speed and increased costs.
The necessity of using VPNs also complicates posting on Instagram, decreases the visibility of Instagram posts, and ultimately risks the closure of business accounts due to Instagram’s occasional perception of hacking based on rapid geographical location changes, a downside of using VPNs.
Moreover, the use of VPNs prevents business owners from utilizing certain Instagram services, like targeting a specific geographical area for advertising and marketing, as specifying a stable and definite location becomes practically impossible with VPN use. Even before Instagram was filtered, leveraging this feature was challenging for business owners in Iran due to the disconnection of Iran’s banking system from the international banking network.
Another problem identified from the data analysis is the businesses’ lack of awareness of their rights, unfamiliarity with existing laws, and the absence of organization for actions such as filing complaints against filtering authorities to counteract the extralegal behaviors of the governance causing damage to these economic entities. This situation is exacerbated by distrust in Iran’s existing legal frameworks and the government’s security-oriented approach to any form of protest at any level.
Conclusion
Iranian small and medium sized enterprises have suffered significant losses due to the blocking of Instagram. Despite this, the platform continues to be extremely popular among these businesses for use in marketing, branding, customer engagement, and online sales. As a result, both these enterprises and their customers are resisting the ban by adopting alternative methods such as using VPNs to access the platform.
On the other hand, these companies lack awareness of their legal rights to protest against the harm inflicted by the government’s actions, such as the blocking of Instagram or the disruption of internet services, and they also consider such protests to be ineffective.
Future research should focus more closely on identifying the reasons behind the lack of interest in protesting against these government decisions that endanger the economic situation of these businesses. Additionally, a quantitative study involving a larger number of SME owners and decision-makers regarding the impact of Instagram’s blocking on their economic status should be conducted.
