Facebook Inc (NASDAQ:FB)’S “sponsored stories” are now “social context”

Posted by: : Viraj ShahPosted on: January 13, 2014 Facebook Inc (NASDAQ:FB)’S “sponsored stories” are now “social context”

Facebook Inc (NASDAQ:FB) has promised earlier that it will be discontinuing its “Sponsored Stories”. The social networking company has now made good on that promise. These “Sponsored Stories” are the annoying ads that use the likes and the identities of your “friends” and promote various pages and brands via that information. Last year, Facebook Inc (NASDAQ:FB) updated the company’s privacy policy, and said that the sponsored stories’ language would be nixed. These ads are no longer going to be referred to as “sponsored stories”. But that does not mean that they are going to take them completely off the platform.

The changed version

What users will see is a revamped version of advertising that uses the profile information. This will now be called “social context”.  The company has given a brief description of these new ads in its blog post. Now, it will not be possible for marketers to but any sponsored ads separately. Instead of that, social context which will have various stories about any social actions that have been taken by friends and will now be eligible to be displayed in the ads that are shown to your “friends” on the social networking platform.

The legal battles

The “Sponsored Stories” concept had to be scrapped post the lawsuit that was filed against the company in 2013. The allegation was that this practice that was being followed by Facebook Inc (NASDAQ:FB) was a breach of users’ privacy. This lawsuit eventually culminated in a settlement of $20M. The company was using the likenesses of user’s in the ads without taking their permission or even compensating them. Despite the fact that it lost the class-action that was filed against it, the company continued with the “Sponsored Stories” for many months. Now, with this new wording of “social context”, Facebook Inc (NASDAQ:FB) is hoping that it will be protected from any class-actions in the future.

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Viraj Shah

Analyst at HEFFX
HEFFX Trading Room is lead by Shayne Heffernan and research from the Trading Desk is prepared by contributor Cyrus, Cyrus has done a M.Com (Finance) and currently pursuing CFP. He is a technical analyst who tracks US markets along with other global markets like India very closely. He is very passionate about stocks and believes that money can always be made in market.
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