A lawsuit has led to Facebook changing one of its most effective advertising tools. It's also one of the social network's newest means of monetizing the site, and it's called Sponsored Stories. The way it works is that if you "like" a certain product or company, that company can create an ad that all your friends will see when they log into Facebook.
The ad appears not as a traditional banner ad like we're all used to seeing, but as a "story" within the Facebook news feed.
But not long after this new means of viral, targeted, personalized advertising hit the site, someone decided to file a class-action lawsuit against Facebook.
Filed in California, the lawsuit did not go to court, and Facebook instead decided to buckle under the pressure and settle the case.
As part of the settlement, it has agreed to give users to option of blocking their names from being used in these advertisements.
The lawsuit's legal grounds certainly didn't lead to an open-and-shut case, but Facebook more than almost any other company relies on its reputation, and any negative publicity from something like a lawsuit is toxic.
The Sponsored Stories feature will not go away, but users will now have to specifically opt into the service to allow their name and likeness to be attributed to specific company ads.
It has been reported that this massive overhaul and scaling back of Sponsored Stories could cost Facebook more than $100 million.