Facebook to pay $10-million in sponsored stories settlement

Ever thought that the ads proclaiming how your Facebook friends “like” some or other fan page are an invasion of their privacy? No? Well, some Facebook users did — and they took Facebook to court over it.

Five Facebook members recently filed a class-action suit against the social networking giant, alleging the “sponsored stories” feature in Facebook violated Californian law by publishing users’ “likes” without compensation and with no opt-out function. They agreed on a settlement, which means Facebook will have to pay US $10-million to charity as compensation.

California law prohibits the unauthorised appropriation of anyone’s name or photo for advertising purposes. The plaintiffs argued that Facebook is contravening this law, since there isn’t an opt-out feature for sponsored stories and the users agreed to Facebook’s Terms and Conditions before the feature was introduced.

The lawsuit also contained comments from Facebook CEO Sheryl Sandberg, saying the value of a sponsored story would be two to three times more than a standard Facebook ad without a friend endorsement. Mark Zuckerberg agrees wholeheartedly, saying trusted advertisements are the “Holy Grail” of marketing.

Facebook settled the case out of court last month — curtailing billions of potential losses in a class-action lawsuit affecting one in three Americans — but news of the settlement only broke this weekend. Facebook and the complainants opted for the “cy-pres” settlement, which means the $10 million can go to charity.

The social network behemoth’s not-so-stellar IPO and rocky road to a current stock price of $30 belies its true strength: sustaining and growing its 900 million-strong user base with their love of games and networking.

This article by Nick Puno originally appeared on Tech Wire Asia and was published with their consent.