As many have pointed out, the reach of Instagram's TOS aren't significantly different than those of services like YouTube and Twitter. But users don't view all social services as equal (and yes, I treat YouTube as a nascent high potential social service, perhaps Google's best chance to build an elite social network). I don't think Twitter users ever worry about their tweets being turned into advertisements, the concept seems extremely unlikely. As for YouTube, from its earliest days the value of having a video hosting service that offers global distribution immediately, for free, seemed worth any amount of advertising.
More importantly, though, I hypothesize one reason the outcry over the modifications to Instagram's TOS have been so much louder is that the ratio of content creation to content consumption on Instagram is higher than for those other services, or for just about any other social network I use. Almost everyone I follow on Instagram seems to post photos from time to time, certainly more than write on Twitter or post videos to YouTube regularly. We need a name for this metric for content sharing social networks:
Number of users who create content / Number of active users on that content network
I'll just call it participation rate for now. My guess is the higher the participation rate on a content social network, the more the users feel like they're creating the bulk of the value on that network. I don't think that's fair to Instagram as they were nearly perfect in creating the purest of social networks, and they do host and distribute a gazillion photos a day. But no matter, that's how users feel, and how they feel determines how they react when the company imposes a value capture mechanism (or in this case, hints at how they'll do it).
What exacerbated the issue was that the new TOS had language that implied that Instagram was going to use your photos to earn money and not provide you with any financial compensation. The users already felt like they'd created a huge percentage of the value in the network, and now it sounded like they'd be exploited to make the company's owners, who had already earned enough money to live out the rest of their days like some of their more well-heeled users, even more money.
[Note that for professional photographers and celebrities on the service, this is actually a serious monetary issue. Naysayers kept mocking regular users for thinking their terrible food and sunset photos would be monetizable in any way, but I follow a bunch of professional photographers and celebrities who make a huge percentage of their living off of monetizing their photographs, and the idea that Instagram could just jump in and take that is absolutely a non-starter. I hope they don't all flee because where else am I going to get my regular fix of pics from the fairy tale life of baddiebey to leave in a constant state of capitalist envy?]
Without knowing what the participation rate is for the leading social networks, it's difficult to test this hypothesis, but one other way to test this would be to look at those who grumbled the most. I suspect they came largely from those who actively post photos instead of just consuming them.
If anyone has any data on this, I'd love to hear it. Namely, it would be fascinating to compare Instagram to two services which I'm guessing have much lower participation rates: Flickr and 500px. Both of those services embrace what I suspect is an audience composed more of a large population of viewers and only partially of contributors (those who upload lots of photos). Both have designed their service with that user distribution in mind, choosing to monetize by targeting only the power users, that sliver of their population that actually upload high-res photos in volume and who value things like higher upload capacity or limits.
It doesn't seem like a strategy Instagram can easily borrow given their viewer/contributor distribution. What fraction of their users could they tax, and for what features? If it's true they have a more evenly distributed base of contributors, i.e. a high participation rate, it may be easier for them to just show ads for all their viewers. That seems the most likely path.