Facebook’s Sponsored Stories Settlement Put On Hold

    August 4, 2012
    Josh Wolford

In June, Facebook and five California plaintiffs reached a settlement in a lawsuit centered on the company’s ad product known as Sponsored Stories. You know the ones – posts that Facebook promote to the top of your news feed or to the side of your homepage. They are always based on previous user activity – a like or a check-in perhaps. “Greg Smith and 4 others like Amazon.com – Sponsored,” for instance.

The plaintiffs in the case claimed that Facebook violated privacy law when they used their likeness in Sponsored Stories without their consent, compensation, and the ability to opt out.

After nearly a year of negotiations, a settlement was reached that had Facebook pay legal fees as well as a cy pres payment which amounted to $10 million to charity. In all, the settlement has Facebook paying around $20 million.

But that wasn’t the only part of the settlement. Under the terms, Facebook agreed to gives users more control over Sponsored Stories as well as amend their terms of service and various help pages to include more information on the ad practices.

From the settlement:

The proposed injunctive relief will provide significant benefits to the Class Members, and to future Facebook members. This relief will include changes to Facebook’s website, to remain for at least two years, to make it clear to all persons with Facebook accounts and the parents or legal guardians of minor users that their names and likenesses may be used in Sponsored Stories ads, thereby ensuring that Facebook has their consent to such uses.

It goes on to allow provisions for minors (under 18) to opt out of being featured as Sponsored Stories completely. Users who are older than 18 will have some additional control – but no true opt out mechanism.

Facebook will create an easily accessible mechanism that enables users to view the subset of their interactions and other content that have been displayed in Sponsored Stories. Facebook will further engineer settings to enable users, upon viewing the interactions and other content that have been used in Sponsored Stories, to control which of these interactions and other content are edible to appear in additional Sponsored Stories.

Basically, users will be able to go back and look at which of their stories have been featured as Sponsored Stories, and will be able to prevent future use of those same stories. But there’s no mechanism here for future opt outs.

All of those changes total about $123 million in damages, according to Facebook. Now, a federal judge has refused to approve the settlement, as he has questions about the actual cash payout.

From Wired:

[Judge Richard Seeborg] suggested he might order the parties to return to provide more information on how it reached that amount. He was concerned that Facebook said the deal might cost them $100 million in advertising revenues, but only $10 million is being paid out. And that doesn’t calculate the amount of damages for the 100 million Facebook users who have already appeared in Sponsored Stories, he said.

“I’m not suggesting there is anything wrong with $10 million,” he said. “My question is: Why is it $10 million?”

He went on to say that he’s going to have to give it a little bit of thought.

The consequence to users? There is still no changes to Sponsored Stories in terms of opt outs or partial opt outs.

“You can’t opt out of being featured in Sponsored Stories, but you can visit your activity log to make sure that only the people you want to share with can see your activity. If you’re aren’t using timeline yet, learn how to remove posts from your profile,” says the Facebook Help Center.


Josh Wolford
Josh Wolford is a writer for WebProNews. He likes beer, Japanese food, and movies that make him feel weird afterward. Mostly beer. Follow him on Twitter: @joshgwolf Instagram: @joshgwolf Google+: Joshua Wolford StumbleUpon: joshgwolf