Blog Post

How new Facebook privacy deal could pay you $10… or $5 … or nothing

Facebook’s $20 million “Sponsored Stories” settlement is back in the news. Months after a federal judge balked at a deal that would have given half the money to lawyers and nothing to users, Facebook has a new offer that might give users $10. But don’t hold your breath.

For the unfamiliar, “Sponsored Stories” is Facebook’s (s fb) term for drafting its users as product pitchmen based on their “Likes.” Here are some examples taken from the revised legal settlement filed Friday in California:

Facebook feels the ads are fair since users pay nothing for its services. But the company landed in hot water because the “Sponsored Stories” appear to violate a California law that forbids companies from using people’s endorsements without their permission.

To make the issue go away, Facebook followed a familiar playbook when tech companies get sued over privacy issues: throw a pile of money at lawyers and privacy groups. This has worked many times in the past for Google (s goog) and others but, unfortunately for Facebook, one judge finally had enough. In August, U.S. District Judge Richard Seeborg refused to sign off on a $20 million plan, noting that lawyers had plucked numbers out of “thin air” and that the Sponsored Stories stars got nothing. Now, under the new plan, reported by Wired, Facebook could pay real cash money to users.

This time, users could get up to $10 if the judge approves the deal, but a closer look at the filing shows this is unlikely to happen. As it turns out, users will only get $10 if there is enough to go around after lawyer and other expenses are paid. If too many of the estimated 125 million eligible people claim the money, everyone’s share will be reduced accordingly. And if the reduced amount falls below $5 per person, the Court has the discretion to give it to the usual suspects — the privacy groups.

This isn’t the only strange feature of the new deal. Another is the notification process. Under the new settlement, Facebook is obliged to create a website and to notify users via email and to place ads in USA Today. This is all well and good but there is no obligation to notify them through, I dunno, Facebook.

The deal also provides lawyers to ask the Court for their share of the $20 million later on but doesn’t specify how much they’ll get. It also obliges Facebook to create a control panel of sorts for users to manage their role in the Sponsored Stories scheme but many of the details are fuzzy.

Overall, the deal is slightly better for consumers but it may not go far enough to charm Judge Seeborg. Here’s a marked up copy of the settlement if you want to decide for yourself:

Fraley v. Facebook Settlment 2