Facebook has agreed to settle a “sponsored stories” lawsuit over its “Like” platform by agreeing to a $10 million one-time payment.
The lawsuit was filed after Facebook began to retransmit users’ activities to their friends’ pages using the “sponsored stories” ad platform. If a user clicked on a “like” button for a brand their likes could appear as a “sponsored story” on their friends’ pages.
Facebook began the sponsored stories service in 2011 and at the time of the first lawsuits the company argued that plaintiffs were not hurt by the practice. Users on the other hand said their personal information was used for commercial purposes without their permission.
Last week court documents pointed to a settlement which was finally confirmed by Facebook attorney Michael Rhodes on Sunday. The settlement will be given to charity after a judge approved the final amount.
U.S. District Judge Lucy Koh wrote:
“California has long recognized a right to protect one’s name and likeness against appropriation by others for their advantage.”
Facebook may have dodged a bullet in regards to this case, if a class-action lawsuit was allowed to move forward at full speed some analysts believed the lawsuit could have ended up costing the company billions of dollars, especially if one in three American’s became entitled to the money.
The hit to Facebook shouldn’t be understated, Mark Zuckerberg has called “trusted referral” advertising the “Holy Grail” of the advertising relationship while Facebook COO Sheryl Sandberg has been quoted as saying “Sponsored Story” advertising is two times to three times more effective than traditional advertisements.