Facebook Reaches Settlement in Sponsored Stories Lawsuit

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A judge in California today approved a $20 million settlement in a class action lawsuit against Facebook, over their use of users likenesses (and 'likes') in paid advertisements.

Way back in the halcyon days of 2011, when people were slightly more cavalier about their data and the Internet, Facebook introduced Sponsored Stories, a system that allowed advertisers to turn users' Likes into product endorsements. So if, for instance, one of your friends enjoyed drinking Pepsi so much that they 'liked' it on Facebook, Pepsi could then use their name and image in an advertisement. Everything was great; the new ads were 46% more effective than the old ones.

Unfortunately, there was a problem. It's actually the same problem Facebook has had since as far back as 2007: the preeminent social network has never done a very good job of letting users control their data or know how it's being used. Facebook users were telling their friends to buy Levi's without even knowing it, and so, rightfully, they took action.

The $20 million settlement brings this chapter of the site's privacy tug-of-war to a close, and the Palo Alto company emerges relatively unscathed. Wired did some math and figured out that if every plaintiff involved in the lawsuit collected their payout, they'd each get about 2 cents.

It was reported by Bloomberg that the company's current market value now exceeds $100 billion amidst positive outlook that the company might have finally figured out how to do mobile ads. The new settlement will only cost Facebook about 1/5000th of its total value. They can probably spare it.

This article is from the archive of our partner The Wire.