Privacy is important to internet users – that’s the main thing we’ve all learned from this incident. In December of 2012, Instagram instituted its new Terms of Service, marking the first big adjustment to terms since Facebook acquired Instagram. What caused millions of users to suddenly abandon ship?

A clause in the new terms was worded to sound like Instagram had the rights to use private photos for profit without the authorization of the uploader. While the service later claimed the paragraph was just worded poorly, it completely removed the clause after losing so many members.

The original privacy policy was retrieved, allowing Instagram to use information gathered on users to provide specific advertisements that may appeal to specific users. This is a fairly standard privacy policy, and we now pretty much expect all of our apps and social networks to gather data on us for this purpose.

The people have spoken. You can’t have their photos for marketing purposes. Public relations won out over advertising. After all, what’s the point of improving advertising if you have to lose most of your audience to do it?

The other important thing we should take away from all of this is that your privacy policy and Terms of Service need to be more easily understood. If this was all just a misunderstanding as Instagram claimed, losing over a million members is a big price to pay for a misunderstanding. Maybe privacy policies need to be clearer and less legal sounding. Foursquare set a nice example the following month by outlining their changes in plain English for their users.

When in doubt, ask the audience – by simply asking users what they think of a proposed change, an unexpected uproar and lots of bad press can be avoided. Facebook claims to have tried this method and received only a limited response, but that’s a lot more preferable to the response they got from changing Instagram’s terms with little warning.

Obviously social media companies need to make money – they are ultimately businesses. Facebook paid a ton for Instagram, but they needed to find a way to make the social network more profitable without alienating users. This is the tightrope that social media companies must now walk.