Instagram Does an About-Face

11:14 p.m. | Updated
SAN FRANCISCO - In the aftermath of the uproar over changes to Instagram's privacy policy and terms of service earlier this week, the company did an about-face late Thursday.

In a blog post on the company's site, Kevin Systrom, Instagram's co-founder, said that where advertising was concerned, the company would revert to its previous terms of service, which have been in effect since October 2010.

“Rather than obtain permission from you to introduce possible advertising products we have not yet developed,” he wrote, “we are going to take the time to complete our plans, and then come back to our users and explain h ow we would like for our advertising business to work.” Users had been particularly concerned by a clause in Instagram's policy introduced on Monday that suggested Instagram would share users' data - like their favorite places, bands, restaurants and hobbies - with Facebook and its advertisers to better target ads.

They also took issue with an update to the company's terms of service that suggested users' photos could be used in advertisements, without compensation and even without their knowledge.

The terms of that user agreement said, “You agree that a business or other entity may pay us to display your user name, 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.”

Following a reaction that included customers defecting to other services, Mr. Systrom told Instagram users on Tuesday that the new policy had been misinterpreted. “It is our mistake that this language is confusing,” he wrote, and he promised an updated agreement.

That statement apparently was not enough. With more people leaving the service, the company, which Facebook bought for $735 million this year, reacted again by returning to the old rules.

Acknowledging those concerns late Thursday, Mr. Systrom wrote: “I want to be really clear: Instagram has no intention of selling your photos, and we never did. We don't own your photos - you do.”

Mr. Systrom said the company would still be tweaking its privacy policy to quell users' fears that their photos might pop-up on third-party sites without their consent.

But Mr. Systrom did not clarify how Instagram planned to monetize its service in the future. Facebook is under pressure to make Instagra m earn income.

“It's a free service - they have to monetize somewhere,” said John Casasanta, a principal at Tap Tap Tap, the maker of Camera+, a photo-filter app that has shunned advertising and instead charges users for premium features. “The days of the simple banner ads are gone. Their user data is too valuable.”

It was unclear whether reverting its terms of service would be enough to satisfy high-profile users like National Geographic, which stopped using its Instagram account in light of the moves, or other users who have aired their grievances on Twitter and Facebook.

The controversy has driven traffic and new users to several o ther photo-sharing applications.

Pheed, an Instagram-like app that gives users the option to monetize their own content by charging followers to see their posts, gained more users than any other app in the United States on Thursday. By Thursday morning, Pheed had jumped to the ninth most downloaded social-networking app in Apple's iTunes store, just ahead of LinkedIn.

O. D. Kobo, Pheed's chief executive, said Thursday morning that subscriptions to the service had quadrupled this week and that in the last 24 hours users had uploaded 300,000 new files to the service - more uploads than any other 24-hour- period since Pheed made its debut six weeks ago.

Another runaway success was Flickr, Yahoo's photo-sharing service, which redesigned its app last week to make it easier to share photos on Twitter. In a stroke of good fortune, it released the app to positive reviews just as Instagram announced it would no longer sync with Twitter, a Facebook rival.

The day before Instagram announced changes to its terms of service, Flickr's mobile app was ranked at around 175 in Apple's overall iTunes app charts. Since that day, the application skyrocketed to the high 20s.

Of course, most of these services are still tiny compared to Instagram, which claims to have more than 100 million members who have uploaded upward of 5 billion photos using its service. And it was unclear if the services' newfound members had also deleted their Instagram accounts or were merely dabbling in other offerings. But the migration, whether temporary or permanent, was a reminder of the volatility of success and that the fall to bottom can sometimes be as swift as the rise to the top.

Facebook and Instagram declined to say whether they had seen any significant number of account deletions or if they were concerned about losing ground in the photo-sharing market to rivals. Some photo apps took direct aim at Instagram. Camera+ even went so far as to include a snide, holiday-themed reference to Instagram's stumbles in an app update on Wednesday.

“We'll never do shady things with your shared pics, because it just isn't right,” the update noted. “On that note, happy Christmas to all, and to all a good night!”