Complicating its efforts to accelerate advertising revenue, Facebook has agreed to make it clear to users that when they click to like a product on Facebook, their names and photos can be used to plug the product. They will also be given a chance to decline the opportunity to be unpaid endorsers.
The changes are part of a settlement for a class-action lawsuit against Facebook in Federal District Court in California. The agreement compels the company to change one of its most effective advertising tools, known as Sponsored Stories.
According to the agreement, filed Wednesday with the court in San Jose, Facebook users will be able to control and see which of their actions on Facebook are used to generate advertisements seen by their Facebook friends. For Facebook users under 18, there is an additional requirement: the company must give parents the opportunity to keep their children out of advertisements.
The settlement does not inhibit the company from using Sponsored Stories, which Facebook executives have repeatedly described as the most effective form of advertising in part because they do not seem like traditional advertisements. Both on the Web and on a mobile device, a Sponsored Story features the name and picture of a Facebook friend who has clicked on the like button for a product or organization.
This is exactly why Sponsored Stories can be bewildering, or off-putting, to some users. Until now, Facebook users were unaware when and how they were exploited for advertising, and they may not have realized that a click on something as vague as a like button could be used to enrich Facebook, the company.
Facebook has declined to comment on the settlement itself. In its defense, it argued that users gave “implied consent” every time they clicked the like button for a particular page, whether it was Ben and Jerry’s ice cream or Barack Obama for president.
It will amend its terms of use to explain that users give the company permission to use their name, profile picture and content.
“This means for example that you permit a business or other entity to pay us to display your name and/or profile picture with your content or information,” the language included in the court document reads.
The company will also offer settings that let users control which of their actions — which individual like, listen, or read — will appear in Sponsored Stories.
The changes are to be made within the next six months. How many Facebook users will decline to participate in the ads remains to be seen. An economist hired by the plaintiffs’ lawyers, Fernando Torres, testified that giving users such a choice could cost Facebook $103 million in advertising revenue.
Luckily for the company, warnings and notices may not keep people from sharing on Facebook. A recent analysis of the accounts of a million Facebook users concluded that nearly 9 out of 10 Americans — and slightly fewer Europeans — share information about themselves that can be misused, according to Secure.me, a company that offers privacy services to users of social networks.
According to the settlement, Facebook agreed to donate $10 million to nonprofit organizations, including Consumers Union, the Electronic Frontier Foundation and several law school programs that specialize in privacy. The company also agreed to pay $10 million in plaintiffs’ legal fees.