Judge concerned with FB Sponsored Stories settlement

In a year-long battle to change the Sponsored Stories feature, a $20M settlement is now questioned

A U.S. District Court judge still holds concerns regarding the settlement Facebook created over privacy concerns with its "Sponsored Stories" feature.

Judge Richard Seeborg yesterday listened to the details of a settlement Facebook had penned with plaintiffs in a suit dealing with the company's popular Sponsored Stories and how they are displayed in a user's feed. 

The five plaintiffs, which are trying to represent more than 100 million members in a class-action suit, believe that by displaying their likeness and pages they had liked for the purpose of Sponsored Stories advertisements, Facebook was violating their privacy. 

Sponsored Stories seemed to be the silver-lining in the dismal Facebook Q2 earnings report last week, earning $1 million a day and with great potential for growth.

Sponosored Stories essentially look at what you and your friends are doing online (reading, posting, liking, checking into) and uses those actions to offer very related and tailored ads. One example would be if 3 of your friends checked into a Starbucks and that was in your news feed, an advertiser might take that feed notification and package it as an ad so that it looked like a friend update but also had verbiage or a coupon like an ad.

Back in May, when this case was last discussed the parties agreed to a $20 million deal that would see Facebook give $10 million to charity and pay $10 million for legal fees.

"That doesn't make any sense to me," Seeborg said yesterday after hearing the details of the settlement, according to Reuters. 

Seeborg was unsure why Facebook was paying $20 million for $123 million in value, and asked the parties why the social network isn't providing the plaintiffs in the case with any monetary damages.

Usually, plaintiffs would get a bulk of the settlement, and the settlement would be far closer to the true value than this is.

With Seeborg still expressing concern on the settlement, it looks like a final decision won't occur for more months.

Under the deal, which settling a year-old lawsuit, Facebook is agreeing to give its adult users the right to limit how the social-networking site uses their faces in ads for its Sponsored Stories product and minors can completely opt-out.

Michael Rhodes, Facebook’s attorney, said it was a valuable settlement to Facebook users. He said Facebook doesn’t have to make any concession, but is settling after factoring in the additional risks of litigation.