When Kristyn Fernandez uploaded a photo of herself with her arm slung over a guy in a Jack Daniel's T-shirt, it caught the eye of more than just her Twitter followers.

A piece of software that scans millions of photos on social media flagged the image, operating on the principle it might hold value for Jack Daniel's or its competitors. Such a photo could show the kinds of customers who favor Jack Daniel's, reveal how consumers interact with the whiskey brand in the real world, or even inspire future advertising campaigns.

Brands covet this kind of information – but it doesn't come cheap. Social networks can charge millions for businesses that want easy access to user photos and information. Increasingly, it is becoming a part of the social media business model, analysts said.

But what makes this service so appealing to brands raises great concerns among privacy advocates and the few consumers who happen to find out about it.

'It's kind of creepy'

Fernandez had no idea that Ditto Labs, based in Massachusetts, scanned her photo – the company does not inform social media users of its actions.

"Without letting me know wherever they took the picture from, it's kind of creepy and a little inappropriate," she said.

Ditto scans publicly shared images on Twitter and Instagram and recently added Tumblr. The company says it does not need to notify the consumers that their images are being sent to its clients because the pictures can be viewed by anyone online. Ditto says it abides by social networks' terms of service and insists its software is less invasive than search-based ads, which track users' e-mail messages and Web-browsing habits. The firm doesn't pull images from Facebook because many users share photos only with friends.

"It's not based on what you're searching, it's based on what is on your public social channel," said Mary Tarczynski, Ditto's chief marketing officer.

Ditto has collected data for brands such as Kraft Macaroni & Cheese, Coca-Cola and Nissan. The company's software identifies products within photos and can tell when people are smiling and frowning. The company says its findings help brands understand how people actually use products, whether it's the surprising number of people who put Chobani yogurt in the cup-holders of their car or the fact that some people top their broccoli with French's mustard.

"It's a real-time focus group," said Ditto CEO David Rose. "This is evidence-based marketing."

Ditto's software operates by scanning for logos. Rose says it is so refined that it can differentiate between the North Face and knock-off brand the South Butt. When Ditto finds a match, it stores the image and adds the user's social media account to a database, which is available to paying clients starting at $2,000 per month.

Window into consumers

Each day, Internet users share more than 1.8 billion photos, according to a report by venture firm Kleiner Perkins Caufield & Byers. For advertisers, the social media posts that include those photos are more valuable than those with just text because pictures reveal how consumers act "in the wild."

"You have a window into their world," said Duncan Alney, CEO of Firebelly Marketing in Indianapolis, which uses Ditto Labs' service.

Alney, whose firm represents a beer company, learned from Ditto that people drink beer not just with pub grub but also with healthier snacks like hummus. And that consumers who favor mainstream beers also consume craft brews.

Other companies use it to interact with fans. Nissan North America found a photo on Twitter of a baby peeking out from behind a cardboard cutout of a Nissan race car driver. Nissan got the Twitter user's permission and reposted the photo on the company's account, garnering 17 retweets and 37 favorites. The original photo was not tagged with "Nissan," so without Ditto the company never would have found it, said Rob Robinson, a senior specialist in social communications at the automaker.

"It's showing us opportunities where fans are expressing their passion for our brand and excitement," Robinson said. "We can harness that energy and share it with our fans."

Ditto Labs has what's called a "fire-hose partnership" with Tumblr, an industry term that generally guarantees access to all publicly available user content. In such deals, third-party companies typically pay social networks for access. Those third-party companies hope to make that money back by analyzing the data and selling it to other businesses.

Ditto has more limited deals with other social networks.

Tumblr, which Yahoo purchased for $1.1 billion last year, wouldn't comment on the details of its arrangement with Ditto. Analysts who are skeptical about Tumblr's future – the microblogging service lost 15 percent of its users in the past year, according to research firm comScore Inc. – see deals like this as a possible boon. A Tumblr executive declined to comment on whether the company is profitable.

Art first, advertising second

Tumblr has been expanding the types of ads it offers, recently placing paid content on users' personal feeds and promoting advertisers' Tumblr blogs across Yahoo properties. Advertisers have a keen interest in Tumblr, which boasts more than 200 million blogs with 41 percent of its users in the coveted age demographic of 18 to 34. Unlike other social media sites, Tumblr's users often repost content that already looks like advertising, for instance a photo of a pair of Vans sneakers, said David Hayes, Tumblr's head of creative strategy.

"It's art first and advertising second in our user's minds," Hayes said.

Ditto isn't the only company that tracks public data on social networks, said Rob Enderle, a principal analyst with Enderle Group. Most social networks allow such arrangements and inform users of them in their terms of service, Enderle said. If customers object to becoming market research or ad inspiration, the penalty would fall on the person who uploaded the picture – not the social media site, Ditto Labs or any company paying for user information, Enderle said.

"If you are a user of a free service, you have to understand how that service is generating revenue, and generally they are generating revenue on you," Enderle said. "If you're not (comfortable with that), you shouldn't be using that service."

Another form of spying?

The problem, according to privacy activists, is that some consumers – like Twitter user Fernandez – don't know it's happening.

"It sounds to me like yet another way the digital world is spying on people," said John M. Simpson, director of Consumer Watchdog's privacy project. It's happening "in ways that the average consumer does not understand."

Ditto and its rivals say consumers will benefit from their photos being shared with brands. Some analysts believe that the service will someday result in more relevant advertisements, and perhaps improved products – say a yogurt container that perfectly fits in a car's cup holder.

As long as users share photos publicly, brands will try to find them, said Brian Blau, a Gartner research director.

"In today's lexicon, you could say a photo is worth 1,000 personal data points," he said.

Wendy Lee is a San Francisco Chronicle staff write. E-mail: [email protected] Twitter: @thewendylee