Facebook has modified its Beacon advertising programme which revealed what members were purchasing from e-commerce sites.
Users could click on a Beacon box on Facebook if they wanted to keep their purchases secret, but in many cases the box disappeared after 20 seconds and consent was assumed to have been given.
Facebook has now said that users will have to opt-in to the system in the future.
"Facebook deserves credit for taking a huge step in the right direction," said MoveOn.org spokesman Adam Green.
"Its decision will hopefully set a precedent for all websites, that the wish-lists of corporate advertisers must not be put before the basic rights of internet users.
"When sites like Facebook listen to users and take steps in the right direction, a little positive feedback goes a long way in encouraging them to keep it up."
The move will be a setback for those looking to monetise the social networking phenomenon.
Mark Zuckerberg, the 23 year-old founder of Facebook, had apparently seen the Beacon system as a litmus test for social network advertising. This back-down puts Facebook's value in question.
Part of the issue behind the Beacon launch may have been down to timing, as some Facebook users complained that Christmas gifts were being revealed by the site.
Sean Lane, a Facebook user from Boston, told The Washington Post that a problem arose when the Beacon system sent an alert to his wife.
The alert said: 'Sean Lane bought 14k white gold 1/5 ct diamond eternity flower ring from Overstock.com.'
The message contained a link to the Overstock site which revealed that the ring was sold at half price. In response, Overstock abandoned the Beacon service.
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