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If you were one of the unfortunate many to participate in the Facebook IPO, here is your chance to (partially) recoup your loss. This week, Facebook agreed to a revised class-action settlement of $10 per “victim” of their sponsored stories. The original law suit claimed that Facebook neither sufficiently informed users of their participation in sponsored stories nor gave them the ability to opt out of it.
So who are these “victims?” Well, they come from a pool of users that at one time clicked the “Like” button for a product or a service with a Facebook page. Afterwards, Facebook created “sponsored stories” on the news feeds of that user’s friends, showing that the user “liked” the page. Of course, the retailer paid a marginal fee to make these stories appear. In the end, over 125 million Facebook users fell “victim” to the scheme.
If this does not sound like a gross invasion of privacy to you, you’re probably not alone. Most internet users understand that there is no such thing as a free lunch. Instead, there is an unspoken agreement between services like Google or Facebook and their users. The user receives free access to the online applications and search services. In exchange, the user allows these companies to access its browsing and internet habits, in order to generate revenues.
This would seem to be the case with sponsored stories as well. The irony, however, is that when a user “likes” something on Facebook, that story appears on the news feeds of friends anyway. The user is already comfortable with that information being disseminated. In fact, it is likely that the user “likes” the page so that other people know what they are interested in. So why does it violate the user’s privacy when Facebook re-shares the “like” to those same friends?
The likely explanation is that this lawsuit did not evolve from a group of frustrated users, embarrassed about the over-sharing of their “likes.” Instead, the class-action suit was likely initiated by attorneys and non-profit organizations who seek to gain the most from a settlement. For example, in the original settlement agreement, attorneys and charities were awarded $10 million each, paling the amount awarded to those who suffered the harm.
In the revised settlement agreement, the pot of $20 million will be split amongst attorneys, charities, and affected users. The $10 award per victim is the result is based on an estimated number of users who will go through the trouble to fill out the paperwork. In fact, if every affected user applied for their share of the settlement, it would be less than $0.02 a person. In that case, you may want to start looking elsewhere to recoup your IPO investment.
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