The alleged "suicide note."

All those calming platitudes from Kevin Systrom haven't silenced the blowback over recent changes to Instagram's terms of service. Reuters broke the news that a class action lawsuit was filed against Instagram this past Friday in San Francisco federal court.

The complaint (below) was filed on behalf of a California Instagram user named Lucy Funes "and all others similarly situated." It accuses Instagram of a breach of contract for violating the convenant of good faith and fair dealing, among other allegations, and demands a jury trial.

Reuters says it "appears to be the first civil lawsuit," in response to changes to Instagram's TOS, implying it might not be the last.

According to the complaint:

If customers do not agree with Defendant's scheme, they can cancel their profile with Instagram. However, upon canceling, customers forfeit all right to retrieve the Property that was previously entrusted to Instagram, which retains right thereto in perpetuity. In short, Instagram declares that "possession is nine-tenths of the law and if you don't like it, you can't stop us."

The complaint also takes issue with Instragram's newly announced mandatory arbitration clause, which forces users "to waive their rights to participate in a class action lawsuit except under very limited circumstances," notes Reuters. The current terms of service, which are in effect until January 19, 2013, do not stipulate that kind of liability shield.

In an email to Reuters, Facebook, which purchased Instagram for $715 million in April, said: "We believe this complaint is without merit and we will fight it vigorously."

Reuters also spoke to Kurt Opsahl, a senior attorney with the Electronic Frontier Foundation. He applauded Mr. Systrom's decision to change proposed advertising terms based on criticism from users, but harped on potential privacy pitfalls in the new TOS:

However, he said the new terms no longer contain language which had explicitly promised that private photos would remain private. Facebook had engendered criticism in the past, Opsahl said, for changing settings so that the ability to keep some information private was no longer available.

Based on the uptick of dog, Christmas cookie and FOMO-inducing vacation photos in our Insta feed, we'd say users seem less perturbed.

Class action lawsuit against Instagram for TOS changes

FarmVille

This is the Summer of Zynga's discontent. There are Zynga's stock woes, which have prompted Forbes to question whether the gaming company is really worth any money at all. Forbes's Eric Savitz writes that "the market is basically saying it simply does not see any long-term value in the company’s ongoing business."

Then there's also this class action suit filed against Zynga in a California Superior Court on July 16, which alleges Zynga failed to pay overtime and has unfair business practices.

According to the suit filed by Richard Ashley, Zynga allegedly bypassed California laws governing overtime wages, so they could use the fancy job titles ("Senior Analyst," etc.) to keep those workers exempt from overtime pay.

Mr. Ashley's suit, filed on behalf of current and former employees of the company, alleges Zynga "misclassified" IT and engineering jobs, giving overblown titles to positions that were essentially "performing routine production work, not requiring special expertise." Jobs the lawsuit states needed "little or no exercise of discretion."

The court papers indicate Zynga was "regularly and generally" working the plaintiffs more than 40 hours a week and never paying them for the additional labor. California law clearly states that non-exempt workers putting in more than the regular 40 get time-and-a-half for their work.

Writing in the Times DealBook in November, 2011, Evelyn M. Rusli described a "tough culture" at Zynga, which was at the time riding high on the popularity of games like FarmVille. At least one paragraph reads now like a warning:

While such a culture is not uncommon in the game industry, it can create problems. Employees at Electronic Arts and Activision Blizzard have filed lawsuits against their employers, with claims of hostile work conditions and withheld compensation. In 2006, Electronic Arts settled two class-action lawsuits by game artists and programmers for about $15 million each. The Activision suit is still pending.

Employees told the Times they were afraid at the time to speak out against Zynga at the time for fear of reprisals.

Though Mr. Ashley's association with Zynga could only be found buried in one cached Google result (he was described as a "CS Senior Lead"), it looks like he and others have decided to exact some sort of reprisal of their own.

(Photo: Inside Facebook)

In a settlement agreement for a class action lawsuit filed yesterday, Facebook agreed to give users more control of their face. According to the terms of the agreement, which still needs to be approved by the judge, users will now be able to opt-out of having their likeness appear in a type of ad Facebook calls "Sponsored Stories," says Reuters.

Back in December, Betabeat got a copy of a leaked document that showed how Sponsored Stories would feature the name of friend and the friend's profile picture and an indication that they "liked" the advertiser in question. The social network thought it had a sweet new revenue stream locked up seeing as users are more likely to click on something when they see their friends' face attached to it as an endorsement.

That prompted five Facebook members to file a class action lawsuit alleging that publicizing users' "likes" without paying them or giving them a way out violated California law.

With the terms of this new settlement, Facebook faces a potential loss of $103 million in revenue, based on the estimates of one of the plaintiff's economists. In fact, as TechCrunch recently noted, this new kind of ad seemed like a solution to Facebook's nagging mobile problem since Sponsored Stories on mobile devices were getting 13 times the click-through rates and earning 11.2 times the money per impression compared to Facebook's desktop ads.

In prior documents, Facebook agreed to donate $10 million to charity as part of the settlement, as well as pay $10 million in attorneys' fees for the plaintiff.

But the settlement isn't as big a victory for facial rights (a terms we just made up right now), as it sounds. For example, the new controls work on a story-by-story basis, so users can't just opt out of the Sponsored Stories racket altogether. Court documents also show that Facebook only agreed to maintain these changes and disclosures for at least two years. Although we're sure by then you'll have bigger things to worry about, like, say what Zuck intends to do with your passport number.

Screengrab from an October 2011 presentation "Facebook Updates"

This is a guest post from a former CTO who now does tech consulting for other start-up ventures and was briefed on Facebook's advertising strategy. The story was edited and checked for accuracy by Betabeat.

If you logged onto Facebook yesterday, perhaps you caught a link at the top of the News Feed that read: "About Ads: Ever wonder how Facebook makes money? Get the details." The answers provided some context on the news that starting in January, Facebook will start integrating a type of ad, called "sponsored stories," that display your friends faces next to content they have "liked" in larger-sized ads your News Feed mix. "Facebook makes its money from showing you ads," the company told consumers yesterday and with the ramp up to its spring 2012 IPO, the social network is getting serious about that endeavor.

In what seemed like an unrelated move, in September, Facebook announced a brand new type of profile called Timeline, where your whole personal history is laid out by month-by-month, all the way back to your birth. At the time, Facebook described it to consumers as a chance to: "Share and highlight your most memorable posts, photos and life events on your timeline. This is where you can tell your story from beginning, to middle, to now." By the end of this year all 800 million plus Facebook profiles will have been converted to this new interface.

What most users don't know is that the new features being introduced are all centered around increasing the value of Facebook to advertisers, to the point where Facebook representatives have been selling the idea that Timeline is actually about re-conceptualizing users around their consumer preferences, or as they put it, "brands are now an essential part of people's identities."

The name itself is cleverly designed to conceal the fact that your profile no longer arranges information chronologically. Yes, things are laid out by year and by month. But, when it comes to what's displayed to your social circle at any given time, other metrics, including direct payments to Facebook itself, will now influence the ranking and placement of stories. This payola will be a crucial part of the graph rank, the new metric for placement that the social network uses to determine what appears on your profile.

"Graph Rank" is a complex and non-published algorithm, but we know direct payments to Facebook and app/user popularity are important parts of the ranking. The newest thing is no longer on top. There is a rough month-by-month sort, but within the month it's graph rank, not chronological order, that determines placement.

For advertisers and social app developers, capturing user tastes (which used to be good enough) is now secondary to knowing what users are doing right now. Your reading habits, music tastes, guilty TV pleasures, holiday gift purchases and so forth are part of stream of information from which Facebook wrings profits and a new advertising channel in and of themselves.

Disguising ads as your friends' updates is being offered up as an antidote to the dismal click-through rates for traditional web advertising. Sponsored stories in your feed and sidebar ads based on your friends' likes will become ubiquitous. Indeed in marketing materials, Facebook says these new premium ads are 90 percent accurate, compared to the industry average of 35 percent. "When people hear about you [the brand] from friends, they listen."

Facebook derives its revenue from advertising--an average of $100 million a month since last January. At this point, many understand that the business model revolves around selling the mountains of personal information people post to Facebook. In the ramp up to its IPO, the company is anxious to show better revenue growth.

As the post from Facebook yesterday morning explained, sponsored stories are different from ads in that a user's name or profile might appear alongside the ad,  "If you've liked that business's page, the story about you liking the page (including your name or profile photo) may be paired with the ad your friends see." While sponsored stories don't include additional messaging from the sponsor, businesses pay Facebook to feature posts and activity that mention their brands. In both cases, these are only visible "to friends you've already shared this information with."

How long users will tolerate this is unclear. There's already a class-action suit pending in California against Facebook for integrating user's pictures without their permission in advertising based on "Likes." Many Spotify listeners and Washington Post readers are no doubt regretting listening to that one good song from that otherwise unpardonable band, or clicking on that salaciously titled article, which then appeared on the screens of everyone they know along with their smiling profile picture.

We have reached out to Facebook for comment and will update when we hear back.

The story broke in PaidContent, which mentioned that several posts on Glass Door, a site where employees can anonymously rate their company and bosses, made mention of long hours under difficult conditions. Betabeat wandered over to check out some of these reviews. What we found was a little shocking. Some choice reviews:

New Management ( VP of Sales and sales managers) approx. 2 months ago.Ever since then it has been awful.

They micromanage you, expect you to work 10+ hours a day and on Saturdays!!!

The managers do NOT care about you or your personal life. In-fact, they don't expect you to have one. They are heartless and care about one thing only- themselves and how much money they make. This used to be fun and they used to care about the customer. Now they do not. It is just about how much money GROUPON makes.

Work environment is terrible -- People are densely packed into benched style seating, which creates for an ultra loud environment (esp in sales).

-Immense pressure to hit unrealistic sales goals
-Management out of touch with what's going on during phone calls (it's getting harder and harder to close deals as more and more people don't want to work with Groupon)
-Used to be a fun culture. Now it's all about the bottom line and feels like your typical call center
-Sales staff are worked to the bone

Change in senior management and new sales management approx 2 months ago - since then
its been horrible work environment.

Everyone is miserable and they treat the customers ( merchants) as well as employees with little respect. All they care about is how much money groupon makes. They also created a "boiler" room environment and micromange to the 100th degree. They suffocate you and you can barely breath or go to the bathroom with out feeling guilty.

They make you feel guilty to take a Saturday off to go to a wedding.

Sales staff cries all the time.

So to paraphrase: Groupon is a boiler room where employees are afraid to take time off to use the bathroom and are driven to tears by the pressure for more sales. It should be noted that these are anonymous reviews. But there are dozens of them describing the same conditions dating back for months. Kind of puts Groupon's explosive revenue growth in a new light.