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Facebook can share advertising incomes among users

19 December 2011 14:01 (UTC +04:00)

Baku - APA-Economics. Facebook Inc., the worldâ€™s most used social-networking service, can be sued by people who claim showing advertisements that their friends apparently like violates a California law regarding commercial endorsements.

U.S. District Judge Lucy Koh in San Jose rejected Facebookâ€™s bid to dismiss the lawsuit on Dec. 16, ruling the plaintiffs may pursue claims that the companyâ€™s sponsored ads violate state law and are fraudulent. Koh granted Facebookâ€™s request to dismiss a claim that it unjustly enriched itself with the sponsored ads.

Facebook earns revenue primarily through the sale of targeted advertising that appears on membersâ€™ Facebook pages, including so-called sponsored stories, which the Palo Alto, California-based company started Jan. 25. A sponsored story is a paid ad consisting of another friendâ€™s name and profile picture and claiming the person likes the advertiser. The plaintiffs claim itâ€™s an unauthorized use of their names and likenesses and that they deserve compensation.

The â€œplaintiffs have articulated a coherent theory of how they were economically injured by the misappropriation of their names, photographs and likeness,â€ Koh wrote.

Facebookâ€™s press office didnâ€™t immediately respond to an e- mailed request for comment, sent after normal business hours in California.
Facebookâ€™s revenue will climb to as much as $6.9 billion in 2012 from $4.27 billion this year, according to estimates by EMarketer Inc., a New York-based research company. Almost 90 percent of 2011 sales will come from advertising revenue, EMarketer estimates.

Californiaâ€™s Right of Publicity Statute prohibits the non- consensual use of another personâ€™s name, voice, signature, photograph or likeness for advertising.

Facebook claimed it was immune under the lawâ€™s â€œnewsworthinessâ€ exemption, which doesnâ€™t require consent. The plaintiffs are public figures to their friends and expressions of consumer opinion are generally newsworthy, Facebook said.

The plaintiffs, in their statement of claim, cited Facebook Chief Executive Officer Mark Zuckerberg saying that â€œnothing influences people more than a recommendation of a friendâ€ and a â€œtrusted referral is the Holy Grail of advertising.â€

On average, each member of Facebook has 130 friends, and Facebook Chief Operating Officer Sheryl Sandberg said â€œmaking your customers your marketersâ€ is the â€œgoal weâ€™ve been searching for,â€ according to the statement of claim.