Sponsored Stories Cost Facebook $20M, But No Word on Revenue

Facebook is aggressively pursuing new growth opportunities to boost its revenue, and convince investors that it has the capabilities to monetize over 800 million active users worldwide.

One of the company’s attempts is Sponsored Stories, a system that aims to make advertisements more relevant to users by associating them with their contacts. The feature was launched last year and we don’t know how much it’s contributing to Facebook’s growth plans, but it certainly cost the social network a lot of money.

Bloomberg reported this morning that the company made headway in a class-action over its use of members’ names and photos in Sponsored Stories.  Facebook received preliminary approval by U.S. District Judge Richard Seeborg after agreeing to new terms that will guarantee compensation to some of the affected users.

“The court is satisfied that the revisions to the terms of the settlement are sufficient to warrant preliminary approval under the applicable standards,” U.S. District Judge Richard Seeborg, who rejected the earlier proposal, said in an order yesterday. He scheduled a June hearing to consider final approval of the agreement.”

Facebook will provide plaintiffs and their representatives in court up to half of the $20 million it agreed to pay. But the remaining $10 million will only be enough to reimburse a small fraction of the more than 120 million users that are eligible to claim a $10 payment.

The social network also said it will implement changes that will make it easier to see when a company might list you as an endorser in their Sponsored Stories.

This update certainly represents progress, but Facebook is not out of the blue just yet. The users’ lawyer fees have not yet been determined, and the Center for Public Interest Law is pushing for parental approval controls.