Facebook has recently settled a class action lawsuit in California surrounding its use of “sponsored stories”. These are ads which appear on a user's friends' newsfeed after the user themself has "liked" a company’s advertisement. With the social network making a $10 million payment to charity, should advertisers be worried?
The plaintiffs primarily alleged that: Facebook's use of sponsored stories violated users' rights to control the use of their activity on the site; and that the use of users' images for advertising purposes by making their "likes" known to others without allowing them to opt out or paying them had violated the Californian state law.
Judge Lucy Koh seemed to agree, stating: “California has long recognised a right to protect one's name and likeness against appropriation by others for their advantage.” Koh ruled that sponsored stories effectively constituted a customer endorsement of a product or service by allotting users’ names or likeness’ to be used in free advertising which potentially violated privacy law.
This case clearly casts doubt over Facebook’s privacy practices in relation to its ad campaigns. So should advertisers promoting products or services using social media be worried?
To date, the total number of reported UK cases in which enforcement action has been taken by the Advertising Standards Authority, the Information Commissioner’s Office or the Office of Fair Trading against advertisers (other than social media platforms), using social media in a way that abuses users’ privacy, is…none. Up to now, the social media platform providers have borne the brunt of privacy-related regulatory activity and user criticism.
Although advertisers have not been dragged into court proceedings yet, this does not necessarily mean that they won’t be party to proceedings in the future. As it is highly unlikely that social media platform providers would offer advertisers indemnities to protect them against such actions, advertisers must assess the risks associated with this type of advertising. Moreover, advertisers should not forget about consumer perception as to what is being done with their data.
To protect brand image and to mitigate action by the regulators, advertisers should consider taking the following action:
Social media providers may have caught most, if not all, of the flak in relation to privacy issues, but this may well change as advertisers increasingly turn to social media for monitoring, marketing and customer relationship management. Advertisers should therefore start to address for themselves the privacy risks associated with social media to show that they respect their customers’ big data!