Kevin Systrom, Instagram co-founder, remained vague as to how advertising would eventually function in the service, however, and legally, the company can still use users' photographs how it sees fit.
"Going forward, rather than obtain permission from you to introduce possible advertising products we have not yet developed, we are going to take the time to complete our plans, and then come back to our users and explain how we would like for our advertising business to work," Mr. Systrom said in an Instagram blog post.
"Instagram has no intention of selling your photos, and we never did. We don't own your photos -- you do," Mr. Systrom's blog post said.
The backtracking came after many of Instagram's most influential users, including National Geographic and photographer Chase Jarvis, said they would delete their Instagram accounts because they were worried that the new terms meant their content would appear as ads on Facebook or elsewhere. But Instagram has technically always had that capability.
Instagram, a free photo-sharing service, must be wary not to alienate users as it tries to monetize them.
"This is a brand that 's beloved, and what we know about a brand is that when they make a misstep, the most loyal users will go from love to hate," said Larry Vincent, brand strategist at United Talent Agency.
There are no shortage of similar services, and data suggests that competitors have already risen in popularity amid the furor.
Flickr, Yahoo's online photo-storage and -sharing service, launched a new iPhone app this week. It jumped from No. 195 among the Apple App Store's free iPhone apps to No. 32, according to app analytics company App Annie. Instagram's ranking has remained steady in the mid-20s.