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FB Buys Startup, Redesigns News Feed

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Reportedly, Facebook Inc. (FB - Free Report) has acquired Storylane, a social networking startup for an undisclosed amount. According to The Wall Street Journal and AllThings D, Facebook has acquired Storylane’s team of five members and will not acquire any user data from the startup.

Launched in Oct 2012, Storylane is a blogging platform that encouraged users to share more personal details. Users were generally asked about their childhood, religion and other details, the answers of which ultimately took the form of stories. Storylane allowed users to not only follow their friends but also strangers, which significantly expanded its customer base within a very short span of time.

Although Facebook stated that it will close down the service, it did not specify any time span. Storylane said that it is building tools that will help users to migrate their content to other services as per their desire. However, the popularity of the platform and the fact that Facebook does not have a blogging service may prompt the company to continue the application, in our view.

Facebook will add Storylane to its long list of talent acquisitions that includes the likes of Glancee (May 2012) and Threadsy (Aug 2012). Although these acquisitions were intended to expand Facebook’s reach in mobile and social marketing, the Storylane acquisition is intended to improve content.

Redesigned News Feed

Facebook recently announced that it has redesigned its news feed, which now focuses more on photographs and visual stories. The new design will give more space to photos, article shares and check-ins. The redesigned news feed will place photos at the front and center, which will improve visualization.

With the enhanced news feed, users do not need to dig deeper in order to find out what’s happening in their social circle. Facebook also enabled its users to switch between multiple feeds and customize new ones by tweaking their preferences.

This aims at removing the complexity of Facebook’s interface. As the platform currently delivers everything from the web into a single news feed, the complex interface makes it difficult for users to access relevant content. Now, users will be able to access Facebook like a newspaper, with the option to choose all posts, most recent posts, or those dedicated to specific categories like music.

Facebook also announced that it is focusing on improving consistency between devices such as personal computers and mobile devices from the likes of Apple (AAPL - Free Report) , Nokia (NOK - Free Report) and Samsung.

Our Take

Facebook continues to face significant near-term headwinds. In addition to “Facebook fatigue” and a complex interface, the company continues to face significant competition from newer social sites such as Google+ from Google , Pinterest andTumblr.

In this regard, we believe that the redesigned news feed will boost customer engagement in the near term. Investors would also like to see the effect of the new updates on advertisers as they contributed approximately 84% of Facebook’s fourth quarter 2012 revenues.

Currently, Facebook has a Zacks Rank #3 (Hold).

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