Facebook has settled a year-old class-action lawsuit that targeted the social network's alleged failure to provide adequate information and privacy controls to users with regard to Beacon, which shared information about users' information on third-party partner sites in Facebook news feeds.
The settlement, announced on Friday, calls for any last vestiges of Beacon to be shut down completely. The advertising initiative failed to gain traction amid a barrage of negative press stemming largely from advocacy groups such as MoveOn.org.
Also as part of the settlement, which is still pending approval from a judge, a $9.5m (£5.9m) settlement fund has been established to set up an independent foundation to "fund projects and initiatives that promote the cause of online privacy, safety and security", according to a Facebook statement. Up to a third of that fund, however, can potentially be recovered by the plaintiffs' lawyers.
"We look forward to the creation of the foundation and its work to educate internet users on how best to control their privacy; engage in safe social-networking practices; and, generally, enjoy themselves more online by having knowledge that gives them a greater sense of control," said Facebook representative Barry Schnitt in the statement. "We fully expect the foundation to team with other leading online-safety and privacy experts and organisations that have been working diligently in these fields."
A "small number of customers" are still using Beacon, according to Facebook, which said it will work to transition them out of it.
The class-action suit was filed in August 2008 on behalf of 20 plaintiffs, most of whom areTexas residents. Named as defendants were Facebook, along with current and former Beacon participants Blockbuster, Fandango (owned by Comcast), Overstock.com, STA Travel, Zappos, Hotwire (owned by InterActiveCorp) and GameFly.
Another Beacon-related lawsuit had been filed against movie-rental company Blockbuster several months earlier, claiming that its participation in the advertising initiative violated the Video Privacy Protection Act of 1987. Facebook was not named as a defendant in that suit.
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Shortly after criticism of Beacon started, Facebook began modifying the service to allow more user control over the feature. However, advocacy groups said the changes did not go far enough, and some partners pulled out of the programme.
Facebook's focus for social-media advertising turned instead to engagement ads and the fan pages it encourages brands, organisations and celebrities to create. The thinking behind Beacon ultimately evolved into the successful Facebook Connect, the universal log-in standard that, among other things, shares third-party activity on members' Facebook profiles.
The privacy controls on Connect are clearer and more extensive than on Beacon. In addition, Facebook Connect has been marketed as a utility for ordinary members rather than an advertising tool for paying clients. It's free for third-party sites to implement and, with only a few exceptions, sites working with Facebook Connect code it in through the social network's application programming interface, or API, rather than sign a formal partnership.
In addition, offering Facebook users the chance to register and log in to external sites without separate usernames and passwords allows Facebook to market Connect as providing user convenience and security, as some web users may be more comfortable hitting a 'Connect with Facebook' button than with registering for an account with a new web service.
"We learned a great deal from the Beacon experience," Schnitt said. "For one, it 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.
"The introduction of Facebook Connect — a product that gives users significant control over how they extend their Facebook identity on the web and share experiences back to friends on Facebook — is an example of this."
In August, a group of Facebook users filed a civil lawsuit against the company alleging that it had violated California consumer privacy laws by disseminating personal information to third parties for commercial purposes. In addition, the company came under criticism from Canada's privacy commissioner, who called on the company to do more to protect its users' privacy.
