Facebook to shut Beacon, create security foundation

Facebook has announced that it will shut down Beacon, a controversial advertising system, as part of a class-action lawsuit settlement.

The company was named in the suit filed last August against Facebook and a number of partners, including Blockbuster, Fandango and Overstock. The action contended that Facebook never sought user approval to share personal data through Beacon.

Beacon worked by enabling affiliate websites to post to Facebook information about actions taken on their site. But the service came under fire almost immediately as users said they automatically were signed up for Beacon and did not want to necessarily share with their friends what they were doing away from Facebook, such as making purchases.

As part of its agreement, announced Friday, Facebook will use a $9.5 million settlement fund to launch an independent foundation dedicated to promoting online privacy, security and safety. A U.S. District Court judge in San Jose, Calif. still must approve the settlement.

"We learned a great deal from the Beacon experience," Facebook spokesman Barry Schnitt said in a statement. "For one, it was underscored how critical it is to provide extensive user control over how information is shared. We also learned how to effectively communicate changes that we make to the user experience."

The company plans to apply lessons learned to its new venture, Facebook Connect, which allows users to take their identities across the web and share their actions with friends, he said. Some of the features are similar to Beacon but with enhanced privacy controls.