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Facebook has just announced the launch of a new ad format, called Sponsored Stories. The privacy implications of this format are bound to raise controversy, again!

When a user makes use of a Facebook App such as check ins via Places or Likes, the new ad feature turns that user’s activity into an ad.

For example, when a user checks into a particular restaurant, the news feed for that user would automatically show a posts saying that the user has been to that place. If the restaurant wishes to, they can turn that news feed item into an ad for that restaurant, via Sponsored Stories.

User checking into a Facebook Place

Friends of the user will see the ad for that place on Facebook as an endorsement by that user.

Starbucks, Coca-Cola, Levi’s and Playfish are some of the organisations that have already partnered with Facebook to advertiser using this new feature. A few non-profit organisations such as Amnesty International, Women for Women and Donors Choose have also agreed to partnership with Facebook and trial this feature.

Sponsored stories can be set up on a pay-per-impression or pay-per-click basis. The new ad unit will initially be available on the home page and user profile pages. Later, it will be made available as a self-serve performance advertising tool for display across the entire site.

The Sponsored Stories will be shown in a special right-sidebar module. The name and profile photo of the user will also be shown. Comments by the user will be shown along with the ad – at present it is not clear whether Facebook will provide a mechanism for advertisers to prevent negative comments from being advertised.

Facebook expects that these ads will have more perceived value than the regular ads, as an endorsement from a friend should have more value.

Sponsored Stories are quite similar in concept to Promoted Tweets. The major difference is that with Sponsored Stories, the user decides the content of the ad whereas with Promoted Tweets the advertiser decides the content.

While uses do not have the option to opt-out of Sponsored Stories, their privacy settings will be respected. In other words, the ad will only be seen by those people whom the original feed item was meant for.