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Facebook's Instagram Catches Hell From Users (Update2)

(Updated from 3:02 p.m. EST to add Instagram's expanded response in the sixth paragraph.)

NEW YORK ( TheStreet) -- Facebook (FB - Get Report), known for upsetting users with constant changes to its policies, has another headache to deal with.

Instagram, the photo-sharing site acquired by Facebook this year, plans to change its terms of service Jan. 16 and allow photos to be used in advertisements on Instagram and potentially on Facebook. The person who took the photos wouldn't receive compensation for what amounts to their property, while Instagram and Facebook would.

Instagram users are justifiably outraged, and some have deleted their accounts.

Under the heading "Rights," Instagram's new privacy policy says: "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."

Instagram, in response, tweeted: "We've heard you that the updates to our Privacy Policy & Terms of Service are raising a lot of questions. We'll have more to share very soon."

The company posted an update on its blog, saying that the changes are being misinterpreted, and is working on updating the language to make sure it is clear. Instagram also noted that its users own the photos, not Instagram itself. "I always want you to feel comfortable sharing your photos on Instagram and we will always work hard to foster and respect our community and go out of our way to support its rights," wrote Kevin Systrom, co-founder of Instagram.

Many are up in arms over the terms of service change, as privacy on the web enters a different dimension.

I did an informal poll on Facebook and Twitter regarding the privacy changes, and 75% of those surveyed on Twitter said they would delete their accounts, had already done so or would do so if the terms weren't changed back. The results on TheStreet's Facebook page showed a similar result.

Celebrities have already taken to voicing their displeasure. Tiffani Amber Thiessen of Saved By the Bell fame tweeted she'll be deleting her account. "Really sad to have to end my luv 4 @instagram. Will be deleting my account due 2 their ridiculous new terms," Thiessen wrote.

Other companies may benefit, including Yahoo's (YHOO - Get Report) Flickr, which recently went through a significant update and redesign.

Interested in more on Facebook? See TheStreet Ratings' report card for this stock.

-- Written by Chris Ciaccia in New York

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