Facebook retires once-embarrassing Beacon advertising system

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Facebook is closing the book on Beacon, an early advertising experiment that got the upstart social network in big trouble with users in 2007.

Back then, Facebook quietly launched the service, which recorded user activities on non-Facebook sites and then reported them to users’ friends.

In the most famous instance, a Facebook user complained that he had ordered a diamond ring for his wife from Overstock.com and that Facebook had ruined the surprise by reporting the purchase to all his friends -- and his wife, too.

The endeavor quickly turned into what ‘60 Minutes’ called ‘a full-blown PR disaster ... including petitions and bloggers writing obituaries’ for the company.

In that same ’60 Minutes’ segment from early 2008, CEO Mark Zuckerberg said that Beacon and the company’s advertising plans ‘might take some work for us to get this exactly right’ and that ‘this is something we think is going to be a really good thing.’

But the company is no longer maintaining that position. Beacon, it says, will be shut down as part of a class-action settlement. The suit was filed against Blockbuster and Facebook last year, accusing the video rental company of violating user privacy by disseminating customer rental information to users’ Facebook friends -- via Beacon.

In addition to decommissioning Beacon, Facebook will also donate $9.5 million to establish a foundation that will focus on online privacy and safety concerns.

-- David Sarno