Instagram will revise two controversial new policies after denying a plot to start selling users' images royalty free.
The popular app sparked threats of a boycott after publishing the new privacy and user policies, parts of which were widely interpreted as a move to market images for commercial use.
Co-founder Kevin Systrom issued a clarification.
"To be clear: it is not our intention to sell your photos," he wrote on the company's blog on Wednesday.
Mr Systrom conceded users were "confused and upset" by the new rules and said they would be updated to make the company's intentions clear.
The clarification appeared to placate some Australian Instagram users who had threatened to close their accounts if their images were sold royalty free.
Dave Holmes, who runs the popular Australia Instagram account, told AAP: "I don't think it will turn out to be as bad as people think."
But there are still question marks over how user data and images will be managed in future.
Instagram, which is free to use, is under increasing pressure to make money, having been bought by the now publicly-traded Facebook for $US740 million ($703 million).
Mr Systrom suggested one way would be for the company to allow individuals and businesses to pay and promote their accounts - with user data and images to tailor those promotions.
Twitter and Facebook both have similar promotional facilities.
Sydney-based intellectual property lawyer Anny Slater said Instagram users may have grounds to sue if they feel photographs are misused.
Any case would hinge entirely on the circumstances and the shape of Instagram's finalised rules.
"Like most things it's dictated by money and value," Ms Slater told AAP.
"If it was a professional photographer's valuable photograph for what might have been Playboy or Zoo Weekly then it might be an issue they could sue about."
University of Melbourne social media expert Dr Lauren Rosewarne agreed that any further backlash among users would be shortlived.