Facebook Beacon settlement a 'necessary move'

Plans to set up digital trust fund in privacy lawsuit will allow social network giant to put issue to rest and build company brand, says industry analyst, who adds Google is unlikely to face similar court case.

Facebook's proposal to set up a foundation to fund projects, focused on online privacy causes, was born out of necessity, says industry analyst, who adds that the move will also help strengthen the company's reputation.

A U.S. federal judge this week approved Facebook's proposed settlement totaling US$9.5 million in the class action lawsuit against the company's Beacon advertising program. In a Computerworld report, U.S. District Court judge Richard Seeborg described the settlement as "fair, reasonable, adequate and proper and in the best interests of the Settlement Class", thus, overturning any objections by the plaintiffs of the class action.

Filed in August 2008 by 20 representative plaintiffs based mostly in Texas, the lawsuit alleged Facebook had violated their privacy with its Beacon technology, which posted information about them online without their permission. Beacon has since been shut down.

As part of the settlement, Facebook will direct US$6 million into setting up a foundation that will award grants to projects that promote online privacy causes. A third of the settlement fund, or about US$3 million, will go toward the plaintiffs' attorneys.

Cambridge-based senior analyst of social computing at Forrester Research, Augie Ray, told ZDNet Asia Facebook's move to establish the digital trust fund is not an issue of being a "right move" but a "necessary move".

Noting that the plaintiffs claimed Facebook's Beacon program broke Federal wiretap and privacy laws, Ray said in an e-mail interview: "As part of a settlement, this makes sense to allow Facebook to put the issue behind them.

"It may also help Facebook's reputation and brand to participate in efforts to study and educate consumers about privacy issues," he added.

In an e-mail reply to ZDNet Asia, a Facebook spokesperson said: "The independent foundation will fund worthy projects helping protect and improve Internet users' privacy, safety and security."

The company will further provide additional details on the foundation "in the weeks and months ahead", she said, and reiterated Facebook's official statement that it is "pleased" Seeborg had approved the settlements after considering all opinions.

Launched in November 2007, Facebook Beacon was part of the Facebook Ads system and allowed targeted advertising. The tool came under much criticism for sharing members' activities on participating third-party Web sites without due warning or notification.

Although the social-networking site later modified the way it informed users about publishing their activities on third-party Web sites, a class action suit was filed in August 2008 on behalf of the 20 plaintiffs.

Google unlikely to face similar situation
Google also faced privacy-related criticisms after the launch of Buzz, a social network that was integrated Google's e-mail service Gmail. Following its launch, users raised several privacy concerns including how Buzz automatically followed everyone on the users' contact list, shared users' contact lists with all other Buzz users, and had a complicated opt-out feature.

Google later made privacy settings more visible for users, and separated followers list into those with Google public profiles and those without. Only users with public profiles would appear on contact lists that are shared by users.

Asked if Google might face similar charges over privacy concerns regarding Buzz, Ray said the consequences will not be as severe for the search giant. Facebook Beacon, for instance, transferred data between third parties while Google did not, he noted.

He added that Google was also quick to react and tweak settings in Buzz after receiving user complaints. This demonstrated the company's attention and sensitivity to privacy issues in social media, Ray said.

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