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Five Facebook users claimed that the ads violated users' rights to control the use of their profiles.
Facebook will pay US$10 million to settle a lawsuit over its "Sponsored Stories" advertisements.
Associated Press explains that Facebook had been paid by companies to retransmit users' activities to their friends' pages. If a user clicked the "like" button for a brand it would show up on friends' pages as a "sponsored story." It generally included another friend's name, profile picture, along with the assertion that he/she "likes" the advertiser.
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According to court documents, proposed class-action suit was brought by five Facebook members who claimed that the practice violated users' rights to control the use of their own names, photographs and likenesses, says MSNBC. The suit was filed in federal court in San Jose, California and could have included nearly one of every three Americans, with billions in damages
The settlement was reached last month but made public this weekend.
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The ads were started in early 2011, and the Daily Maily reports that there is now "a question mark over a major source of ad revenue for the company."
In the court papers, Facebook boss Mark Zuckerberg claimed that a trusted referral was the Holy Grail of advertising, while Facebook's chief operating officer, Sheryl Sandberg, added the value of a sponsored story was up to three times that of a standard Facebook advert, according to Metro.