Wednesday, October 10, 2012

Facebook Inc (NASDAQ:FB)’s Sponsored Stories lands in trouble

Facebook Inc(NASDAQ:FB) had come up with a good way for advertising their sponsors, without making it look like overt advertisements. This was done through the use of Sponsored Stories. The social-netwroking site says that this is one of the most lucrative ways of making money, especially through mobile devices. The advertisements are not really like ads, but are more like updates on what the user’s friends   like on Facebook. Since advertisement comes in the form of notices, it takes up very little space, and can therefore come up on mobile devices as well. Also, they cost very little to be made. However, many people are not pleased with this mode of advertisement.

The companies which had put up their advertisements on the site are now in trouble, because a lawsuit which was pressed against this mode of advertising has created a lot of problems. The class action lawsuit was supposed to be settled, but the settlement was rejected by the court, and Facebook is therefore desperately trying to make amends by compensating all those people whose names and pictures had come up in the sponsored stories. The site says that it is ready to pay $10 a piece to all those people whose names were used in the adverts.

The settlement which tanked, which was filed in a federal court this year, sometime during the first quarter, said that the site would be paying $10 Million to the plaintiff lawyers are compensation and they would give $10 Million to charitable institutions dealing with privacy laws. However, Richard Seeborg, a U.S District Judge, rejected the offer, due to the unfairness of the deal. The money which Facebook was ready to shell out was an ambiguous amount, which did not really reflect on the gravity of the situation. He wanted an explanation as to why the site would choose these figure, and also an explanation as to how this would directly benefit the people whose privacy had been abused. His verdict towards the previous settlement came in August.

Due to this, the site has now agreed to pay the users, whose information had been used, $10 a piece. The revised settlement was filed on Saturday, and it said that apart from the above mentioned deal, the site would split the $20 million, and pay the remaining amount to the lawyers and the charities. Seeborg is to sit for the hearing on the 25th of October. 

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