Facebook settles class action by allowing users to avoid having their photos appear in advertisements

Posted on: June 27th, 2012 by Steve Larson

A settlement in a recent Facebook class action lawsuit means users will soon have the option to back out of ads that show their pictures and name next to “sponsored” advertisements on the social networking pages of their friends. The decision comes after users claimed Facebook was using their images without first obtaining proper permission.

Under the new rules, analysts believe Facebook is set to lose upwards of $100 million in lost revenue.

 As part of the class action lawsuit Facebook was ordered to pay $10 million.

Facebook was sued after users who clicked on the “Like button” for a brand or service saw their pictures and names recommending that brand to their friends. During the lawsuit Mark Zuckerberg called friend based referral advertising the “Holy Grail” of the social network advertising market.

While Facebook does not have to stop the advertising platform they have been ordered to provide an “easily accessible mechanism” for users to “opt-out” of the platform and to see how much of their data is being used for Sponsored Stories.

Facebook is no stranger to lawsuits, another case recently filed against the planet’s largest social network alleged that the company has been illegally tracking users after they log off the site, that lawsuit calls for $15 billion in damages. In another lawsuit involving Facebook, IPO investors say Mark Zuckerberg and his team informed some investors of troubling revenue information while leaving other investors high and dry just as the company prepared to debut on the Nasdaq exchange.