Facebook Complies to Settle Lawsuit

In order to settle the class-action lawsuit filed against them, Facebook has agreed to shut off it's Beacon advertising system. Filed in August of 2008, the lawsuit stated that the beacon associates of Facebook, like Overstock.com and Blockbuster, along with Facebook violated multiple laws, which included the Electronic Communications Privacy Act, the Video Privacy Protection Act, the California Consumer Legal Remedies Act and the California Computer Crime Law.

As of Friday, the proposed settlement required Facebook to not only discontinue Beacon, but also to back the creation of an independent foundation which is entirely devoted to promoting online privacy, online safety and online security. The money is to come from a $9.5 million settlement fund.

According to Facebook's Director of Policy Communication Barry Schnitt, "We learned a great deal from the Beacon experience. For one, it was underscored how critical it is to provide extensive user control over how information is shared. We also learned how to effectively communicate changes that we make to the user experience. Facebook is looking forward to the creation of the foundation, which we expect will team up with existing safety and privacy organizations."

The lawsuit was filed in San Jose, California and thus the settlement agreement must be approved by the U.S. District Court for the Northern District of California, San Jose Division.

The lawsuit over Beacon is ironic due to the fact that Beacon launched in November 2007 amidst much fanfare and yet has become Facebook's biggest nightmare. Beacon was intended as a key piece of Facebook's "social ads" strategy. Beacon was designed to broadcast the things members of Facebook did on participating websites to their friends. The goal was to make these notifications act as a new form of "social" advertising.

However, Beacon was complicated to use for most members and also seemed stealthy and intrusive. It came as a great shock that members of Facebook that their friends were being informed of things like purchases they had made on other websites. Advocates of privacy and security experts joined in with critics of Beacon. Facebook did modify beacon many times, although it never took off and has been pushed into obscurity.

Despite this debacle with Beacon, executives of Facebook continually say that the advertising business of the privacy-held company is solid and growing. In addition to offering traditional online ads, which include pay-to-click ads and banners, Facebook has continued to develop social ads and different vehicles for marketing like Facebook Pages that allow different organizations to promote things such as their bands or products.

Facebook probably won't suffer much from this lawsuit due to the fact it is being settled. However, the company dodged a bullet here and needs to be more careful in the future. With the extensive network of people all over the world which are members of Facebook and the problems the internet already has with security, no company can be too careful.