By Jeff Labrecque
Updated December 18, 2012 at 10:14 PM EST
Credit: Thomas Coex/Getty Images

When Facebook agreed to purchase Instagram last April for about $740 million, users of either social networking web service had to know this day would come. On Monday, Instagram announced a new Terms of Service, scheduled to take effect on Jan. 16, that declares its right to use your uploaded photos in advertisements on the site, minus any compensation to you. Also, your personal information — as you must already realize — is not so personal, and Instagram has the right to share it with Facebook and third-party advertising partners.

Many users immediately voiced their displeasure with the new policies, and some are promising to abandon the free service.

Instagram explained that the new policy is meant to help it “function more easily as part of Facebook,” which already attaches your Friends’ profile images to ads of products they’ve Liked. “Nothing has changed about your photos’ ownership or who can see them,” Instagram said on its website. “Our updated terms of service help protect you, and prevent spam and abuse as we grow.”

But author Dan Gillmor, who founded the Knight Center for Digital Media Entrepreneurship at Arizona State University’s Walter Cronkite School of Journalism and Mass Communication, says that Facebook has a poor track record of protecting users’ privacy. “It doesn’t surprise me that they’re doing it again,” he says in an e-mail. “I would expect, in the next few days, to see Facebook/Instagram follow the standard Facebook playbook: Take one step back, having taken three steps forward, and call it ‘listening to our users.'”

Ding, ding ding!

Late this afternoon, Instagram posted its “We’re listening” blog post to reassure users and eliminate any confusion:

The primary issue, of course, is money. Instagram was purchased for nearly $1 billion. Facebook could well be worth 12 figures. Yet, both services (like Twitter, and other online social sites) are free to join. So there will continue to be an aggressive effort to monetize the site in other ways. Alexis C. Madrigal of The Atlantic made the argument that the only realistic preventative measure against such user exploitation is a pay-service model. “Truly, the only way to get around the privacy problems inherent in advertising-supported social networks is to pay for services that we value,” he wrote. “It’s amazing what power we gain in becoming paying customers instead of the product being sold.”

Gillmor agrees: “This is a clear example of why we should be willing to pay for some software and services. I want to be a customer, not a product, and I’m willing to pay for that — but increasingly I’m not given that opportunity … A user of the Instagram app should not have to make a choice of either accepting such sweeping terms or quitting the service altogether.”

But is that even a remote possibility? Can a generation that grew up expecting everything online to be free — news, music, a social life — be persuaded to pay for their idealism? Gillmor thinks this is a great opportunity for rival sites — like Flickr — to attract disgruntled Instagram users by offering a friendlier Terms of Service, but would you volunteer to pay a monthly fee for a site that protected your personal information and prevented your favorite photo of your 8-month old from being paired with an advertisement for diapers? Or are we just spoiled brats who want our cake and to eat it too?