SAN FRANCISCO (Reuters) - Instagram, the popular photo-sharing service owned by Facebook Inc, said on Tuesday it has "no plans" to incorporate user photos into ads in response to a growing public outcry over new privacy policies unveiled this week.

Instagram Chief Executive Kevin Systrom said in a blog post that users had incorrectly interpreted Instagram's revised terms of service, released on Monday, to mean that user photos would be sold to others without compensation.

"This is not true and it is our mistake that this language is confusing," Systrom said. "To be clear: it is not our intention to sell your photos. We are working on updated language in the terms to make sure this is clear."

But Systrom said Instagram may display users' profile pictures and information about who they follow as part of an ad - a social marketing technique similar to what Facebook uses in its "sponsored stories" ad product.

He added that Instagram will not incorporate users' uploaded photos as ads because the service wants "to avoid things like advertising banners."

Instagram, which is free to use, triggered an uproar this week when it revised its terms of service in order to begin carrying advertising.

Facebook bought the fast-growing photo service - now with 100 million users - earlier this year in a cash-and-stock deal valued initially at $1 billion. The transaction closed in September at $715 million, reflecting a decline in the value of Facebook shares.