Instagram revealed an update to its terms of service Thursday night after facing criticism for the policy it proposed earlier this week. The company decided to reinstate its original section on advertising and made a few other tweaks to clarify that it does not plan to sell user photos.

Instagram’s original language regarding ads is actually less specific and legally allows the same type of advertising that Instagram implied it might create under its new terms, but returning to its previous ad terms gives the company the appearance of concession and looks like a bigger win for users than if Instagram had simply rewritten that section.

On Monday, Instagram laid out a new privacy policy and terms of service to better reflect its status as an affiliate of Facebook and pave the way for some form of social advertising in the future. Many users were surprised and confused about what Instagram proposed regarding advertising, which said,

“…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.”

Despite the fact that the description matches exactly what Facebook has done for years with Sponsored Stories and other social ads, some media outlets wrongly interpreted this clause as giving Instagram the right to sell photos to advertisers for use in print, web or TV ads. The photo sharing company was vilified as a result, and finally decided to go back to its original language about advertising.

“Some of the Service is supported by advertising revenue and may display advertisements and promotions, and you hereby agree that Instagram may place such advertising and promotions on the Service or on, about, or in conjunction with your Content. The manner, mode and extent of such advertising and promotions are subject to change without specific notice to you.”

“You acknowledge that we may not always identify paid services, sponsored content, or commercial communications as such.”

In a blog post explaining Instagram’s plans, CEO Kevin Systrom apologized for the confusion and iterated, “Instagram has no intention of selling your photos, and we never did. We don’t own your photos – you do.” Systrom said the company will continue to consider advertising opportunities, but won’t amend its terms of service until it has a more specific idea of what these ads will involve:

Going forward, rather than obtain permission from you to introduce possible advertising products we have not yet developed, we are going to take the time to complete our plans, and then come back to our users and explain how we would like for our advertising business to work.

Instagram’s latest terms of service go into effect Jan. 19. Users can compare the new and old versions on the company’s site.

Nielsen reports stats on Facebook’s dominance in U.S. – Facebook continues its reign as the most-visited social network in the U.S., according to Nielsen. The service has an estimated 152.2 million visitors via PC, 78.4 million mobile app users and 74.3 million mobile web visitors in the U.S. This is multiple times the size of the next largest social sites across each platform. Facebook is also the top U.S. web brand when it comes to time spent on site. About 17 percent of all time spent online via personal computer in the U.S. is on Facebook.

Facebook puts new policy to a final vote – Facebook this week put its proposed Data Use Policy and Statement of Rights and Responsibilities to a user vote, likely for the final time. Part of the social network’s proposed changes include the elimination of the voting mechanism. Unless 30 percent of users participate in the vote and vote against the changes, Facebook will remove the voting option from its governance policy completely. Voting ends on Monday at noon PST.

New Facebook app available for Blackberry - Facebook for BlackBerry smartphones version 3.3 was released this week with BBM integration, faster photo browsing and an option to unfriend people, as well as an overall refreshed look and feel. BlackBerry users can now initiate BBM chats from the Facebook app, add BBM friends to Facebook, share their BlackBerry pin more easily and see which Facebook friends are also on BBM.

Facebook tries customer service via chat - Facebook is testing a way for businesses to receive customer service over Facebook Chat rather than with a phone call. The program has been in testing for a few months, but was first covered by TechCrunch this week. The system is powered by Salesforce, which Facebook uses internally. Some customers will be pleased by the convenience of chat, while others might find it impersonal and frustrating. Overall, it will reduce call center costs for Facebook.

Judge approves Sponsored Stories settlement – A federal judge has approved a $20-million settlement for a class-action suit over Facebook’s Sponsored Stories advertisements. The company will provide a cash payment of up to $10 to Facebook users who objected to the use of their name and photo in Facebook ads. Facebook will also give users more control over these ads, including a way to opt out of being included in them.

Facebook countersues over ‘want’ button – Facebook this week filed a countersuit against Michigan-based company CVG-SAB, which claims the social network’s unreleased “want” button is infringing on the trademark of its own button of the same name. CVG-SAB says it began marketing a want button in September 2010 to allow consumers to keep track of products and services they want around the web.

Facebook tested a want button, as well as “like” and “collect” options, in its Collections feature earlier this year. The social network also seemed to be testing a plugin that created a want button for third-party sites, but that feature was never released. CVG-SAB says there is already confusion in the marketplace. Facebook denies it is violating any of the Michigan company’s trademarks, claiming “want” is an everyday term. Facebook is asking the court to drop the suit against it and to cancel all of CVG-SAB’s trademarks and trademark applications for the want button.

Judge dismisses antitrust case against Facebook – A federal judge on Thursday dismissed an antitrust complaint against Facebook, ruling that the social network has the right to exclude users who install software to change the look of its site or swaps out its ads. A company that lets users personalize their Facebook page with custom images through an application called PageRage claimed that Facebook violated antitrust law by pressuring advertisers to stop using PageRage and locking out users until they they removed the program from their browsers. U.S. District Judge Cathy Ann Bencivengo said in her ruling:

There is no fundamental right to use Facebook; users may only obtain a Facebook account upon agreement that they will comply with Facebook’s terms, which is unquestionably permissible under the antitrust laws. It follows, therefore, that Facebook is within its rights to require that its users disable certain products before using its website.

Facebook claimant indicted for fraud, forced to pay legal fees - Paul Ceglia, the man infamous for claiming ownership of Facebook, was indicted for mail and wire fraud this week and is now being forced to pay Facebook nearly $90,000 in legal fees. Ceglia was indicted on charges that he faked evidence to support his claims that he signed a contract with Facebook CEO Mark Zuckerberg that gave him partial ownership rights to the company. Ceglia first brought his claims to the court in 2010.

Nokia puts Facebook buttons on new phones - Nokia this week revealed two new phone models that include physical Facebook buttons to allow users to jump straight to their social network profile. The Asha 205 and Asha 205 dual-SIM are the first Nokia phones to include the Facebook button, which first appeared on the HTC ChaCha and HTC Salsa in 2011. The Asha phones also include Qwerty keyboards and features that allow users to browse the web with minimal data.

Facebook execs and board member sell some shares – With the end of an employee lockout this week, some top Facebook executives have sold portions of their shares. COO Sheryl Sandberg sold less than 2 percent of her shares for more than $7.4 million. Chief Accounting Officer David Spillane sold 256,000 shares, which is more than half his entire stake, raising $5.4 million, and General Counsel Ted Ullyot sold 149,075 shares, getting more than $3 million. Early investor and board member Jim Breyer sold $81 million worth of Facebook stock earlier this week. Breyer still holds more than 7.2 million Facebook shares. VP of Engineering Mike Schroepfer filed an SEC document today indicating that he is not selling any shares at this time. Facebook stock closed at $21.18 today, down nearly 9 percent from last week.

Facebook sued over Credits - Kickflip Inc., which does business as Gambit, sued Facebook this week over claims that the social network broke antitrust laws with its Credits program. Business Week says Gambit was the leading virtual currency and payment-processing provider to social game developers. Gambit claims Facebook’s decision to require Facebook Credits in 2009 destroyed a “vibrant and competitive market.” The case has been filed in federal court in Wilmington, Delaware. Facebook says the claim is “without merit.”

SEC to look more closely at Nasdaq compensation plan – The U.S. Securities and Exchange Commission has said it would extend proceedings to review Nasdaq OMX’s $62 million compensation plan following the exchange’s botched handling of Facebook’s initial public offering. Brokers say they collectively lost around $500 million because of issues on the day of the IPO, including delays in orders being put through and confirmations being returned.

FB underwriters spent millions to support stock on IPO day – Facebook’s underwriters may have spent about $66 million supporting the stock’s price on the day of the company’s initial public offering, according to a blog post by economists Thomas Eisenbach and David Lucca. The report explains how underwriters likely put in bids at $38 and $40 per share as the stock threatened to fall below the $38 offer price. This would mean underwriters spent about 40 percent of their underwriting commissions. “If this estimate is correct,” the economists say, “underwriters’ reputational concerns and obligations to the firm may have outweighed their short-run profit motive.”

Facebook stock back below $20 – Facebook shares closed this week at $19.52, down more than 6 percent since Monday. The stock fell below $20 on Wednesday and did not recover. On Tuesday, the company announced it will report Q3 earnings after trading closes on Oct. 23. Earlier this week BTG Media downgraded Facebook from a “Neutral” rating to “Sell” with a $16 price target.

Facebook says tracking lawsuit isn’t specific enough – Facebook attorney Matthew Brown told a judge last Friday that a $15 billion lawsuit alleging that the company secretly tracks users’ off-Facebook activity should be dismissed because the plaintiffs didn’t specify how they were harmed. According to Bloomberg, he says the plaintiffs haven’t identified what kind of data or information was collected about them or whether Facebook used it in anyway or shared it with any other parties.

Facebook proposes new Sponsored Stories settlement – Facebook has revised its proposed $20 million settlement of a case regarding Sponsored Stories after a judge rejected the company’s first plan, Reuters reports. The new agreement would allot $10 million to cover lawyer fees for the plaintiffs and allow users to apply for a cash payment up to $10 each, addressing the judge’s concern that the settlement previously include cash for users. The original proposal set aside money for charity instead. If the new settlement is approved, any money that is left over after users’ claims and other expenses will go to charity.

Lithium Technologies acquires Social Dynamx - Social CRM company Lithium Technologies announced its acquisition of another social CRM application Social Dynamx. Lithium will combine its offering with that of Social Dynamx, available immediately as Lithium Social Web. Terms of the deal were not disclosed. Lithium previously acquired brand tracking application Scout Labs.

Facebook tests more visual login page - Facebook is testing a number of new designs for its login page, some including photos or illustrations that stretch across the length and width of the browser. According to images shared with TechCrunch, the new designs include the call to action, “Connect and share with the people in your life,” and moves the sign-in more to the center of the browser rather than the top right corner.

Facebook wanted to acquire Sparrow team - Facebook was reportedly in talks to acquire Sparrow, the email client for Mac OS X and iOS that ultimately sold to Google in August. FrenchWeb and TheNextWeb have sources that say Facebook was interested in Sparrow first, but when the deal stalled, Google was able to woo the team over to its Gmail product. It’s unclear whether Facebook wanted the team to work on its messages product or was generally impressed by its design talent.

Thismoment updates marketing platform – Social brand marketing company Thismoment released an updated version of its platform, Distributed Engagement Channel 4. DEC 4 helps brand marketers create, distribute and measure dynamic interactive brand experiences across multiple sites and devices. It includes support for Facebook Timeline and Open Graph, in addition to other platform features like Twitter Cards. More new features are explained here.

Facebook, Google, Adobe and others partner to help developers - Facebook this week announced its participation in the Web Platform Docs alpha release, along with Adobe, Google, HP, Microsoft, Mozilla, Nokia, Opera and the W3C. The partnership aims to build a single place on the web for developers to find the information they need to be successful at building apps and websites. The docs on WebPlatform.org are aimed at developers of all levels, spanning a range of topics from how the Internet works to best practices for approaching accessibility. Facebook has donated many of the documents on this HTML5 Resource Center to WebPlatform.org.

Facebook filed a 22-page letter with the Federal Trade Commission outlining its thoughts and recommendations for the commission’s proposed changes to the Children’s Online Privacy Protection Act (COPPA).

The social network lauded the FTC’s commitment to protecting children’s online experiences and privacy, but expressed concern about some language in the proposed change, which could hold Facebook liable in cases where third-parties use its social plugins and create additional burdens for Facebook, developers, publishers and parents. In particular, Facebook urged the commission to explicitly allow first-party advertising as an acceptable use of a child’s “persistent identifier,” such as an IP address or cookie ID.

The FTC is proposing that COPPA be expanded to apply to apps, games and online ad networks, in addition to the child-directed websites it currently covers. Some language in the proposal would deem website publishers and developers that use plugins like Facebook Login or the Like Button as “co-operators” with Facebook. Facebook Chief Privacy Officer Erin Egan, who wrote the letter to the FTC, suggests that the language in the proposal “fundamentally misunderstands the relationship between plugin providers and website publishers.” The social network, for example, makes plugins available but doesn’t choose which websites use them, which plugins they use or how they use them. Neither does Facebook share data with the third-parties that use its plugins. As such, the company wants to ensure that it would not be held liable under COPPA for offenses by web publishers or app developers that integrate with its platform.

The FTC proposal makes some exceptions for collecting and using children’s information as needed for “support for internal operations.” Facebook requests that the FTC clarify its definition of “support for internal operations” to include data captured by plugins and to explicitly include activities that do not impact children’s privacy, such as first-party advertising. The letter cites the commission’s previous reports that distinguish first-party advertising from third-party advertising because it does not raise the same privacy concerns and is generally an expected part of free websites and online services.

Egan further recommends that COPPA not include language that requires operators of child-directed sites to “treat all users as children” and obtain parental consent even if they otherwise have knowledge that a user is 13 years or older. For example, if a user has signed up for Facebook, the user has verified that they are over 13 by providing a birthdate. Egan says this should apply to third-party sites that integrate plugins without requiring additional consent or age verification. “It would be nonsensical to require an operator to obtain verifiable parental consent before collecting information from a parent,” Egan writes.

As we’ve previously written about, Facebook could ultimately serve as a means for age verification all around the web. In its letter, the company suggests that the commission could add explicit clarification that publishers can use a common mechanism to obtain verifiable parental consent, as Microsoft, Disney and a number of organizations have suggested in their comments to the FTC. Doing this, Egan writes, would minimize the burden on parents by reducing the number of times they have to give consent and eliminate the need for multiple detailed privacy notices. Instead, parents could give consent and get notice up front. They would then then get a more specific notice when a child wants to play a game or use a new app. If a platform provides this ability, Facebook argues, it should not assume liability or turn the platform into a “co-operator” with third-party apps or websites that implement it.

The Wall Street Journal reported in June that Facebook was taking steps toward allowing children under 13 to be allowed on the site, including creating mechanisms that would connect children’s accounts to those of their parents. Facebook has not publicly shared whether it is planning to lower its age limit or how it would do so.

New Facebook for Blackberry app available – RIM released a new version of Facebook for Blackberry this week, including improvement for event management, birthdays and navigation. The new app includes event information and RSVP functionality. Users can integrate birthdays into their phone’s calendar and receive reminders to write on friends’ walls. There are also updated icons on the navigation grid.

University of California sues Facebook and others for patent infringement - University of California patent licensee Eolas Technologies Inc and the Regents of the University of California filed lawsuits against Facebook, Wal-Mart and Disney on Wednesday over four interactive technology patents they believe the companies are infringing. Two of the patents cited in the lawsuits were declared invalid in February when they were used in a separate lawsuit against Amazon, Google Yahoo and others. Facebook claims the suit is without merit.

Facebook friends influence voter turnout, study finds – Facebook researchers and scientists at the University of California, San Diego found that people who saw messages on Facebook that their friends had voted were more likely to go to the polls than those who didn’t see a similar message. A study conducted they during the mid-term congressional election found that that 80 percent of those who voted were influenced to do so by someone they knew online.

Study suggests small websites benefit most from social sharing – Smaller news sites tend to see a greater percentage of their traffic come from sites like Facebook and Twitter, according to a study conducted by Northwestern professor Rich Gordon and Syndio Social CEO Zachary Johnson and paid for by The Chicago Community Trust. Small websites got more than half their referrals from social media, while the large sites got only about 19 percent from social.

Facebook promotes App Center above News Feed - Some Facebook users saw a large message about the new App Center above their News Feed this week. The social network launched App Center in June as a new means of game and app discovery. The App Center includes more visuals and an improved permissions authorization flow compared to the previous Apps and Games Dashboard. Facebook says 225 million users visit App Center each month, though that number is likely driven significantly by prompts and promotions like the one below.

The state of California today approved Facebook’s plan to acquire Instagram for $300 million in cash and 23 million shares of its stock. This brings the deal, which was announced in April, closer to closing. Instagram shareholders still have to vote to formally approve the sale.

This morning lawyers and employees from Facebook and Instagram attended a “fairness hearing” before the California Department of Corporations. Facebook called for the hearing as a way to obtain exemption from federal registration and speed up the acquisition process. Without a state-level fairness hearing, it can take more than six months and over $250,000 to register a securities offering, according to the California Department of Corporations website. California is one of six states in the U.S. that allow this quicker and more cost-effective review.

Since the time Facebook announced its intent to buy Instagram, its shares have lost significant value on the public market. The formerly $1-billion deal is now worth close to $750 million at Facebook’s $19.10 share price as of today at 1 p.m. PT. The LA Times reports that co-founder and CEO Kevin Systrom says he recognized the risk of Facebook losing value and was negotiating on the basis of cash and stock options, not the end valuation. He says the media played up the $1-billion valuation, but he believes Instagram’s 19 shareholders will still vote in favor of the deal.

“We still believe firmly in the long-term value of Facebook,” he said.

Systrom also revealed that although he had been approached by other companies looking to buy Instagram, no formal offers had been made.

Last week, the Federal Trade Commission closed its investigation of the acquisition without taking any action, allow the deal to proceed. Instagram has gained more than 50 million new users in the four and a half months since Facebook announced its plans to acquire the mobile photo-sharing network.

Facebook co-founder and early investor sell shares – Facebook co-founder Dustin Moskovitz and early investor Peter Thiel both sold a portion of their shares since the IPO lockup period ended last week. Thiel, of venture capital firm Founders Fund, sold nearly 20.1 million shares, a majority of his stake. Thiel, who is a Facebook board member, also maintains voting control over the shares owned by Founders Fund. Moskovitz, who helped build the site with Zuckerberg, sold 450,000 shares, leaving him with 7.05 million Class A shares.

Frank Gehry to design building at Facebook HQ – World-renowned architect Frank Gehry has been tapped to design Facebook’s new building at its headquarters in Menlo Park, Calif. Construction for the 420,000-square-foot project will likely begin in spring next year. The campus extension will be a large, one room building that somewhat resembles a warehouse, though it will be surrounded by trees and include a roof-top garden. An underground tunnel will connect the new building to the rest of the campus.

Facebook agency learning tool rolls out – Facebook has begun to offer Facebook Studio Edge, an interactive learning program for agencies. The program, which is still in beta for select agencies, is designed to help agencies stay on top of the latest product updates and best practices for marketing with Facebook. Topics include the latest on Facebook Pages, ads and social technology.

India government calls on Facebook, Google to remove content – Facebook and Google said Tuesday they are working on requests from India to remove “inflammatory and hateful content,” after the government suggested the rumors spreading across the sites were sparking a mass exodus of people from several cities. Facebook, which has about 50 million users in India, told the Wall St. Journal that it had received the requests and said it is working to respond to the concerns. ”Facebook will remove content which breaches our terms,” it said in a statement.

Facebook has filed a countersuit claiming Canadian telecommunications company Mitel Networks is infringing on patents it now owns, The Next Web reports.

The social network alleges that Mitel infringes on its patents for a “telephone status notification system” and “user definable on-line co-user lists.” These are both patents that Facebook bought from Microsoft a month after Mitel’s initial patent suit was filed. The patents were originally owned by AOL, but the company sold them to Microsoft in April.

In March, Mitel filed suit against Facebook over patents for “pro-active features for telephony” and an “automatic web page generator.” The challenge came a week after Yahoo filed suit over 10 patents it claims the social network violated. Facebook ended up countersuing Yahoo as well, but the companies came to a settlement last month that includes cross-licensing their patent portfolios and a new advertising partnership.

It is unclear whether Facebook will pursue a similar patent-sharing deal with Mitel. The social network has also filed a motion to dismiss Mitel’s initial lawsuit.