You agree that a business may pay Instagram to display your photos in connection with paid or sponsored content or promotions without any compensation to you.

That sentence was added to Instagram's terms of service yesterday, sparking widespread outrage — the most panicked analysis claims Instagram just gave itself permission to sell everyone's photos at will. Even the least icky hypothetical scenarios being tossed around are completely icky: your parents leave a comment on a photo of your kid, and five minutes later, they're looking at an ad for a new life insurance policy featuring that same intimate photo of their grandchild. Is this really the future of Instagram?

Well, in a way. But it's a lot more like Facebook's current "sponsored post" system than anything else — there's no way Instagram can up and sell your photos to anyone, and advertisers are fairly limited in what they can do with those photos. Here's what's going on.

There's no way Instagram can sell your photos to anyone

Instagram's new terms of service, which go into effect on January 16th, clearly state that your photographs and associated information (like location data) can be promoted by companies without anyone notifying you about the transaction. It's not even hidden in legalese — it's right there in black and white:

To help us deliver interesting paid or sponsored content or promotions, you agree that a business or other entity may pay us to display your username, likeness, photos (along with any associated metadata), and/or actions you take, in connection with paid or sponsored content or promotions, without any compensation to you.

Adding to the creep factor, the next section says that Instagram "may not always identify paid services, sponsored content, or commercial communications as such." They're not even going to tell anyone about the ads. Again: icky.

But let's step back for a minute and think about what this actually means. First, like every other company on the web that stores user data, Instagram has always had an expansive license to use and copy your photos. It has to — that's how it runs its networks of servers around the world. And Instagram's existing terms specifically give the company the right to "place such advertising and promotions on the Instagram Services or on, about, or in conjunction with your Content." Instagram has always had the right to use your photos in ads, almost any way it wants. We could have had the exact same freakout last week, or a year ago, or the day Instagram launched.

Instagram has always had an expansive license to use and copy your photos

The new terms actually make things clearer and — importantly — more limited. That "on, about, or in conjunction" with language is dead and gone. Now you're only agreeing that someone else can pay Instagram to display your photos and other information only in connection with paid or sponsored content. These phrases have very specific meanings — Instagram can't sell your photos to anyone, for example. It simply doesn't have permission. And Budweiser isn't allowed to crop your photo of a bar, slap a logo on it, and run it as an ad on Instagram — that would go well beyond "display" and into modification, which Instagram doesn't have a license to do. (In fact, the old Instagram terms allowed for modification, but the new ones don't — they actually got better for users in that regard.) In technical legal terms, Instagram doesn't have the right to create a "derivative work" under 17 USC §106. The company can't sell your photos, and it can't take your photos and change them in any meaningful way.

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.

Instagram screwed up royally by not explaining these terms in any way

And anything to do with your personal photos can be icky. Turning a "like" of a new film or status update about a morning coffee into advertising for Iron Man and Starbucks is an explicit statement about a product or brand — Facebook's simply taking our actions and repackaging them as social ad units. Instagram photos don't really have that connection: the company will be using our personal emotional moments in a limited commercial manner, even if they have no connection to the product being sold. And make no mistake: Instagram screwed up royally by publishing these new terms of service and not explaining them in any way. They could be written better and more clearly, and Instagram's intentions could be made much more plain. Instagram has our photos — the company has a responsibility to tell us exactly how it plans to make money with them, even if the plans are fairly benign.

The real lesson here isn't about Instagram — it's about how little we trust Facebook

All startups learn harsh lessons like this sometimes, but Instagram is a startup no longer: the company just made close to a billion dollars selling itself to Facebook. That's great, but the downside is that Instagram is now part of Facebook, the company we all love to hate because of its relentless quest to monetize our private lives. It's no wonder Instagram's new terms have triggered a passionate, emotional reaction in people who don't understand them — the same thing happens to Facebook users who are constantly falling for privacy hoaxes.

In fact, the real lesson here isn't about the legal implications of Instagram's terms of service — it's about how little we trust Facebook to do the right thing.

Additional reporting by Ben Popper