Facebook should allow its members to sell their usage data to advertisers. And it should have always been that way. If it had, the controversial Beacon advertising platform might have succeeded. Instead, it's the target of a new civil lawsuit, filed last week in federal court.

The 20 plaintiffs bringing the suit say that Facebook went too far in tracking and sharing their shopping and other consumption data via Beacon. Eight of the company's partners are also named in the suit, including Overstock.com (NASDAQ:OSTK), Blockbuster (NYSE:BBI), IAC's (NASDAQ:IACI) Hotwire, and Comcast's (NASDAQ:CMCSA) Fandango movie-ticketing service.

Personal data is, um, personal
Far as I can tell, Beacon is no more; a search for the application at Facebook returned no results. Nor is Beacon listed among the applications created by Facebook at the site.

Perhaps that's a good thing. Beacon, as it was originally designed, was an "opt-out" service, meaning that users had to opt out of sharing information with every purchase. The result? Unintended revelations, such as when a man's wife was notified, through her Facebook news feed, of a ring her husband had purchased for her. He's now party to the class action suit. (Surprise!)

Many writers, including a few of us Fools, have documented where Beacon went wrong. Not allowing for voluntary participation tops the list. But I'm not even sure Beacon would have succeeded as an opt-in service. The entire process was doomed to failure the minute CEO Mark Zuckerberg assumed that personal data was Facebook's to share as it pleased.

Let's talk privacy
The digital narcissists who use social networks have as much of a right to privacy as do the hermits who still don't use email. But Beacon didn't account for this truism. Rather, Zuckerberg and his team assumed that they owned the data they had. Even if that's true legally -- and I don't honestly know -- the fact remains that using data without asking is morally reprehensible.

"If Facebook's argument is that sharing private information with hundreds or thousands of someone's closest 'friends' is not the same as making that information 'public,' that shows how weak Facebook's argument is," MoveOn.org spokesperson Adam Green told CNET's News.com last year, when outrage over Beacon had reached a peak.

Green's point is a good one: Permission is the key to data-driven marketing. The good news? We know that permission marketing works on the Web. (My apologies to business guru Seth Godin for stealing his phrase.) Consider Helium.com, a site for writers that I occasionally contribute to. Helium shares advertising revenue with its authors and buys a non-exclusive license to every article posted.  To me, that's a model that honors ownership -- and it's one that Facebook should copy.

Think about it. If Facebook transformed Beacon into a revenue-sharing system, its users would be likely be (a) more willing to share data and (b) more discerning about what data is valuable, since only data that earns advertising dollars would be of use.

Socially Foolish
Social networking is a toddler: It walks perfectly for a few steps and then falls suddenly. With Beacon, Facebook fell. But the fall isn't terminal, and it doesn't mean that Zuckerberg and his team shouldn't try again. He was right when he said at Beacon's launch that "we are in a time in history where more information is available and people are more connected than they have ever been before." That insight alone may have been what prompted Microsoft (NASDAQ:MSFT) to invest $240 million in Facebook. It's probably also what drove Google (NASDAQ:GOOG) to strike a search deal with News Corp.'s (NYSE:NWS) MySpace.

But advertising isn't a right, Facebook, it's a privilege. You're privileged to have the data you've been given. Treat it that way; it's the first step to shedding your reputation as a toy and becoming the serious business tool that Mr. Softy hopes you'll be.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.