According to the Terms that would have taken effect Jan. 16, Instagram says that some parts of its service might be supported by advertisers, with sponsored content potentially featuring users' shared photos.
MORE: Instagram responds to photo use outcry
"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," reads an excerpt of updated Terms.
The stipulation even applied to users under 18. The new Terms were first spotted by The New York Times.
STORY: Can Instagram really use your photos for ads without paying you a dime?
Although Instagram says users still have ownership of photos, the service's Terms state that by adding a photo to your account, you are giving the service license to use your content. Users can control what images are posted or deleted, as well as who can view their pictures.
In a hastily written statement on Instagram's blog, co-founder Kevin Systrom said a newer update will take effect in 30 days.
"Our intention in updating the terms was to communicate that we'd like to experiment with innovative advertising that feels appropriate on Instagram," says Systrom. "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."
The backlash began soon after news of the Terms spread, as Instagram users threatened to quit the service. "Consumers don't want their pictures used in ads without their knowledge or permission or compensation," says Radar Research analyst Marissa Gluck. "Someone who doesn't even use Instagram could even be in an ad if one of their friends takes a picture of them."
Meanwhile, National Geographic, a prolific user of Instagram with more than 640,000 followers, says they will stop sharing new images until Instagram's terms have been clarified. "We are very concerned with the direction of the proposed new terms of service and if they remain as presented we may close our account," reads their last update on the service.
Reaction to the Terms has not been received well by USA TODAY readers. "I won't use it," says @tonyajpowers via Twitter. "Facebook has ruined Instagram. There are other cool filter apps that I can use on my pics."
"Instagram's new policy is an egregious use of its customers information," adds Twitter follower @Craig_cgc. "I'll be gone."
Since launching in 2010, Instagram has a become a huge hit on smartphones, allowing users to add artistic flair to photos by applying a variety of retro filters, then share them with others. The service hosts more than 100 million users that have uploaded more than 1 billion photos between the Apple iOS and Google Android mobile platforms.
"The amount of money they spent, they obviously want to get a return on it," says analyst Arvind Bhatia of Sterne Agee. Bhatia predicts Instagram could rake in between $500 million to $700 million in advertising revenue in the next three years.
"Instagram was focused on building its user base, not on monetizing that base," says Gluck. "But now that it's owned by Facebook, which is under enormous shareholder pressure, it has to build a revenue model."
As the New York Times points out, the only way to stop Instagram from using your pics is by killing off your account. However, for those who enjoy a social world of filtered mobile pics, there are several alternatives including Camera Awesome and Flickr.
By Brett Molina