And the company's co-founder is trying to make it clear that they won't be selling users' photos.
The company's new policy seemed to state that while it does not own users' photos, it does have the option to license them and sell the photos to advertisers or other companies.
That news immediately raised a furor, particularly on Twitter, with users, angered over the idea that Instagram could make money with their own photos without any permission. Many users threatened to stop using the service.
Systrom then pointed out that there has been a lot of confusion about their upcoming policy change.
"Our intention in updating the terms was to communicate that we'd like to experiment with innovative advertising that feels appropriate on Instagram," he wrote. "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. We are working on updated language in the terms to make sure this is clear," he added.
However, Systrom's blog post today seems to stand in contrast to the wording in their upcoming policy change. That states, in part, "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."
Dan Olds, an analyst with The Gabriel Consulting Group, said the company's initial policy change seemed pretty clear and that Instagram now obviously is backing off a policy it has been planning on pushing through.
"To me, this reads like a full-fledged backpedal," said Olds. "The original policy made it clear that they have a full license to do pretty much whatever they want with user images... It looks like the user revolt was successful -- at least so far."
The fact that Instagram backed down in the face of such user outrage doesn't surprise Olds.
"This move by Facebook and Instagram is one of their worst. Telling users that you have the right to sell their pictures? It's caused an outpouring of anger, scorn, and loathing from a wide swath of their user base," he said. "People are imagining that pictures of their kids might end up being used as a commercial for some new toy or vacation resort."
However, Olds also noted that no one has seen the final policy revision yet and users should stay tuned. :Although the blog posting by Instagram founder Kevin Systrom seemed to back away from the most controversial parts of the policy, no one has seen the final revised language yet," he said.
Sharon Gaudin covers the Internet and Web 2.0, emerging technologies, and desktop and laptop chips for Computerworld. Follow Sharon on Twitter at @sgaudin, on Google+ or subscribe to Sharon's RSS feed . Her email address is email@example.com.