So, I’m all for Instagram (bought by Facebook for $1 billion in April) monetizing its product, since monetizing is just a fancy way of saying “do exactly what the heck a business exists to do— make a profit.” I think it’s silly when people are shocked to find the super-keen social tools they’ve been using will not continue to exist entirely free of fee or any ad interference. Please see the freak-out when a Facebook veep confirmed, yes, Instagram might try some stuff to make money:

Business Insider rocked certain segments of the tech world today with the following, typically breathless headline: “FACEBOOK CONFIRMS: Ads Are Coming To Instagram.” To be clear, the article itself neglects to substantiate this assertion. Here are Facebook VP Carolyn Everson’s exact words, according to Business Insider:

BI: Will you put ads in Instagram?

CE: Eventually we’ll figure out a way to monetize Instagram.

That’s not a “yes,” it’s a dodge. There are many ways to monetize services besides putting ads in them, and while it’s certainly logical to assume that advertising would be among those, Everson specifically avoided confirming that. Yet the tech blogosphere has run with the non-story anyway. The Verge took the admirable step of making its headline accurate, rendering it, “Facebook confirms it will ‘monetize’ Instagram.” But it apparently overlooked the fact that once you make the story accurate, it’s no longer a story. Or does our naivete about the social-media industry run so deep that “Business confirms it will eventually try to make money from its products” counts as breaking news?

That was less than a week ago. Now, let’s look at the new terms of service announced for Instagram today, which have spawned a whole new freak-out. CNET:

Instagram said today that it has the perpetual right to sell users’ photographs without payment or notification, a dramatic policy shift that quickly sparked a public outcry.

The new intellectual property policy, which takes effect on January 16, comes three months after Facebook completed its acquisition of the popular photo-sharing site. Unless Instagram users delete their accounts before the January deadline, they cannot opt out.

Under the new policy, Facebook claims the perpetual right to license all public Instagram photos to companies or any other organization, including for advertising purposes, which would effectively transform the Web site into the world’s largest stock photo agency. One irked Twitter user quipped that “Instagram is now the new iStockPhoto, except they won’t have to pay you anything to use your images.”

“It’s asking people to agree to unspecified future commercial use of their photos,” says Kurt Opsahl, a senior staff attorney at the Electronic Frontier Foundation. “That makes it challenging for someone to give informed consent to that deal.”

That means that a hotel in Hawaii, for instance, could write a check to Facebook to license photos taken at its resort and use them on its Web site, in TV ads, in glossy brochures, and so on — without paying any money to the Instagram user who took the photo. The language would include not only photos of picturesque sunsets on Waikiki, but also images of young children frolicking on the beach, a result that parents might not expect, and which could trigger state privacy laws.

If you already have an Instagram account, you have until Jan. 16 to decide if you want to submit to the new terms of service. If your kids have one, it might be worth telling them about this. You can delete your account, but that’s your only opt-out.

Your mileage may vary but as for me, I was on the verge of creating an Instagram account (I wasn’t an early adopter on this one) and probably won’t now. My husband, who’s an avid photographer but never had an Instagram account, is now happy he stuck with Flickr, which has rules more in line with Instagram’s old terms of service. I recognize this may seem silly of us considering all the access to information we give to Facebook and Google, though with both services I try to do as many opt-outs as possible. Something about giving over absolute ownership of family photos seems more viscerally intimate in a way other bits of data don’t.

But it’s an interesting and common dilemma in the new electronic age. These companies are undoubtedly doing us great service, and we don’t have to pay for them as long as they can use us and our data to make money. They do that in ways that can make some people uncomfortable. They often do it in ways that aren’t terribly transparent— Facebook, I’m talking to you. I appreciate the Electronic Freedom Foundations and CNETs and TechCrunches of the world trying to bring clarity to the growing number of dense and legalistic terms of service agreements we sign onto every year of our lives, so that we can then make smart decisions about whether to patronize these companies.

The exact same quality that makes Facebook or Instagram irresistible to advertisers makes them nearly irreplaceable for users— they’ve both reached critical mass. Deleting one’s Facebook account in revolt over new terms of service doesn’t exactly allow one to sign onto MySpace to get the same service. At the heart of the service is the number of your friends and family who are on Facebook. Deleting one’s Instagram account doesn’t then mean one can sign up for a comparable service because part of the service is the Who, not just the What.

Maybe this will blow over and Instagram users will just snap away mostly blissfully ignorant of where their photos end up and how they’re used. Because Instagram doesn’t have to notify you, it has the advantage of being a hidden revenue, not in your face like ads that would remind people why they’re mad all the time. For now, many are posting this “How to Delete Your Instagram Account” how-to on Twitter. There are already a host of how-tos for saving and moving your Instagram photos before deleting.

As I said, I’m all for Instagram making money off its many users in some way. But whenever a business makes a change, it has to be mindful of the kinds of customers it’s trying to keep and the kind it’s still trying to woo. Frankly, a lot of Instagram’s most enthusiastic users are hipstery Millenials with a sense of entitlement bigger than the supercomputer in “War Games” (not that they’ve seen that). Is it any wonder they’d take loud exception to this? Making money requires making changes while preserving the trust of customers and what made the product great. These rules seem to undercut that quite a bit. Led by celebrities on Twitter, they seem to be deleting en masse today:

http://twitter.com/markhoppus/status/281099968373202944

The Anonymous “hacktivists” are pushing a boycott, which will no doubt go viral, at least for a while.

Someone at The Nation RTs a broader policy question:

MT @kade_ellis NSA spies on your phone calls, elec. transactions, emails: people don't care. Instagram changes TOS: popular revolt ensues.

— jeremy scahill (@jeremyscahill) December 18, 2012

While you may disagree with the objections to the federal government in this particular critique, I do think it’s worth thinking about how we could get the public to loudly demand the government be half as responsive and smart as we demand private companies are.

I’m curious how our commenters deal with these online privacy issues. I try to stay aware and use basic opt-outs and privacy settings, but what if they’re not available to you? Do you abandon the service or charge onward in your Instagramming?

Exit video: If you don’t know much about Instagram, here’s a good parody/primer. It’s pretty funny, but apologies for even a parodic use of Nickelback. Observe a slight content warning for some language.

Update: Another reporter says, though the new rules are a tad icky, the freak-out is an overreaction. But even if he’s right, and we take the most benign interpretation of the terms of service possible, really badly calculated not to have a roll-out in which they explained this.

So what can Instagram do? Well, an advertiser can pay Instagram to display your photos in a way that doesn’t create anything new — so Budweiser can put up a box in the timeline that says “our favorite Instagram photos of this bar!” and put user photos in there, but it can’t take those photos and modify them, or combine them with other content to create a new thing. Putting a logo on your photo would definitely break the rules. But putting a logo somewhere near your photos? That would probably be okay.

If all of this seems vaguely familiar, it’s because it’s basically what Facebook has been doing with Sponsored Posts for months now — advertisers can pay to “sponsor” your posts in various categories to make sure they prominently appear in your friends’ News Feeds. So if you “like” The Hobbit, the filmmakers can pay Facebook to promote that post across Facebook. The main difference is that Facebook is a little more clear and careful about what can and can’t be promoted — you do lots of different kinds of things on Facebook, so it fundamentally has more things to sell. Pretty much all you do on Instagram is share photos, so there’s just not much else the company can do to make money except use those photos and your data to sell ads.

Update: Instagram responds. The Internet can really spin itself into a outsized temper tantrum very quickly that’s disproportionate to the threat posed. Instagram should have known that and explained its rules instead of just throwing them out there with what looks like pretty bad, unclear legal language. They know it now:

Yesterday we introduced a new version of our Privacy Policy and Terms of Service that will take effect in thirty days. These two documents help communicate as clearly as possible our relationship with the users of Instagram so you understand how your data will be used, and the rules that govern the thriving and active Instagram community. Since making these changes, we’ve heard loud and clear that many users are confused and upset about what the changes mean.

I’m writing this today to let you know we’re listening and to commit to you that we will be doing more to answer your questions, fix any mistakes, and eliminate the confusion. As we review your feedback and stories in the press, we’re going to modify specific parts of the terms to make it more clear what will happen with your photos.

Legal documents are easy to misinterpret. So I’d like to address specific concerns we’ve heard from everyone.

Click through for clarifications on advertising, ownership of photos, and privacy settings, if you’re an Instagram user.