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Beacon was one of Facebook's marketing services that offered integration to third-party sites accessed by users by publishing associated alerts on the social networking site. For example, if a Facebook user purchased a book on a partner site, this would be published as a news update.

The problem was, Beacon started out as opt-out rather than opt-in and privacy groups felt that this threw up a raft of privacy problems as users found it was too easy to miss the finer print and not realise there was an opt-out option, resulting in possibly sensitive and private purchasing data being published across their entire Facebook network.

Following the signing of an online petition by 50,000 Facebook members objecting to Beacon, the social networking site changed its policy.

"We've made a lot of mistakes building this feature, but we've made even more with how we've handled them," said Mark Zuckerberg, founder and CEO of Facebook.

"The problem with our initial approach of making it an opt-out system instead of opt-in was that if someone forgot to decline to share something, Beacon still went ahead and shared it with their friends."

The apologies and Beacon tweaking did not assure the public. A lawsuit filed in August 2008 accused Facebook and Beacon third-party partners, including Blockbuster, of violating US laws, including the Electronic Communications Privacy Act, the Video Privacy Protection Act, and the California Computer Crime Law.

As part of the settlement, which was publicly announced late Friday, Beacon will be switched off for good.

"We learned a great deal from the Beacon experience. For one, it was underscored how critical it is to provide extensive user control over how information is shared," said Barry Schnitt, Facebook's director of Policy Communications, in an official statement.

"We also learned how to effectively communicate changes that we make to the user experience."

Main photo: Facebook founder and CEO Mark Zuckerberg.

By Marie Boran