Facebook pitches $20m 'Sponsored Stories' settlement agreement

Facebook has offered a new settlement amount in the ongoing class action lawsuit resulting from its "Sponsored Stories" scheme.

The social networking site has proposed a figure of $20m (£12.5m), which will be shared by the class action lawyers, various charities, research groups and the 125 million US Facebook users who appeared in Sponsored Stories without their consent.

The offer follows an earlier, rejected settlement plan of just $10m (£6.2m), which Facebook proposed in August, and which didn't include payout for users whose likenesses and personal information had been used in advertising without their permission.

Facebook has been running Sponsored Stories since January 2011, offering advertisers the opportunity to pay to turn newsfeed stories of friends into product and service advertising.

Initially limited to just one such advert a day, the state of California nevertheless found Facebook to be acting unlawfully by not paying users for use of their activity and likenesses.

If all 125 million users affected claim from the $20m pot, they will be awarded less than two cents of compensation each.

"We believe the revised settlement is fair, reasonable, and adequate and responds to the issues raised previously by the court," Facebook spokesman Andrew Noyes told Reuters.

Sponsored Stories was among the first of many methods Facebook has attempted to make money amid a continuing shift to mobile that has lessened the effectiveness of traditional pay-per-click advertising.

Despite hitting 1 billion users last week, Facebook is now worth about half of its IPO opening value of $104bn (£64.8bn) in May 2012.