Facebook: About 83 million accounts are fake

About 83 million Facebook accounts are fake, the embattled social network stated in a recent Securities and Exchange Commission filing.

Last week, the company reported in its first quarterly earnings report that it had 955 million active users. However, in Facebook's 10-Q filing published Wednesday night, the company admitted that about 8.7% of these accounts were fake.

That translates to 83.09 million fake accounts.

In March, Facebook stated in an SEC filing that it estimated about 5% to 6% of user accounts were fake, which at the time meant that between 42 million to over 50 million user profiles were not real.

"While we recently refined and improved our methodology for recognizing what we call duplicate or false accounts, we believe this does not change the return on investments we deliver to advertisers," a Facebook spokerspon said in a statement to CNBC.

Facebook has dedicated teams that are constantly monitoring and removing false accounts, the spokesperson said.

"Authentic identity is important to the Facebook experience, and our goal is that every account on Facebook should represent a real person," the spokesperson said.

In the recent filing, Facebook broke down their estimates of fake accounts into three categories.

According to the company, about 4.8% of monthly active users were "duplicate accounts," which is an account that a user maintains in addition to their primary account; about 2.4% of the monthly active user accounts were "misclassified accounts," or accounts that represent an entity besides the user, such as a business or a pet; and about 1.5% of the accounts were "undesirable accounts," or accounts that purposely violate Facebook's terms of service, such as spamming.

Facebook does allow profiles for businesses, organizations and other entities. However, users are supposed to use a Facebook Page instead of a personal profile for these purposes, according to the filing.

"We are continually seeking to improve our ability to identify duplicate or false accounts and estimate the total number of such accounts, and such estimates may be affected by improvements or changes in our methodology," the company stated in the filing.

Facebook estimates that duplicate or false accounts are lower in developed markets like the United States or Australia, and higher in developing markets that include Indonesia and Turkey, according to the filing.

The social network, which went public in May pricing at $38 per share, has lost almost half its value since its IPO.

Investor doubts about Facebook's growth prospects, and concerns about the August 16 expiration of a lock-up period, helped pushed the stock to a new low Thursday, just under $20.

Reference: http://www.freep.com

Facebook will change ad service to settle lawsuit

In this photo illustration, a Facebook logo on a computer screen is seen through a magnifying glass held by a woman in Bern May 19, 2012. Picture taken May 19, 2012.

Credit: Reuters/Thomas Hodel

By Dan Levine

(Reuters) - Facebook Inc has agreed to allow users more control over how their personal information is used in its "Sponsored Stories" ad feature, part of a deal to resolve litigation against the social networking company.

The value to Facebook members resulting from the changes is about $103 million, in the opinion of one economist hired by the plaintiffs. But the amount Facebook will actually pay to settle the case is just over $20 million, according to court documents filed on Wednesday.

A "Sponsored Story" is an advertisement that appears on a member's Facebook page and generally consists of another friend's name, profile picture and an assertion that the person "likes" the advertiser.

Five Facebook members filed a lawsuit seeking class-action status against the social networking site, saying it violated California law by publicizing users' "likes" of certain advertisers without paying them or giving them a way to opt out.

The case involved over 100 million potential class members.

Under the terms of a settlement agreement filed on Wednesday, Facebook members will be able to control which content can be used for Sponsored Stories. Facebook agreed to maintain these changes and other new disclosures for at least two years, according to court documents.

Attorneys for the plaintiffs say the changes to "Sponsored Stories" are worth $103.2 million, based on an economist's analysis of the revenue each ad brings to Facebook. Those figures were redacted in the court documents.

A Facebook representative declined to comment, and an attorney for the plaintiffs could not immediately be reached.

Facebook has agreed to pay $10 million to organizations devoted to educating people about how to use social networking technology safely. Groups set to receive money include the Electronic Frontier Foundation and the Center for Internet and Society at Stanford Law School, according to the court documents.

Facebook will also pay an additional $10 million for plaintiff attorneys' fees.

The settlement agreement must be approved by U.S. District Judge Lucy Koh in San Jose, California. She must weigh whether the deal's terms adequately benefit class members.

In the lawsuit, Facebook Chief Executive Mark Zuckerberg was quoted as saying that a trusted referral was the "Holy Grail" of advertising.

In addition, the lawsuit cited comments from Facebook chief operating officer Sheryl Sandberg, saying that the value of a "Sponsored Story" advertisement was at least twice and up to three times the value of a standard Facebook.com ad without a friend endorsement.

Koh said the plaintiffs had shown economic injury could occur through Facebook's use of their names, photographs and likenesses.

Plaintiff attorneys argued in court filings on Wednesday that the policy changes and charitable awards will constitute "significant benefits" for the class members.

The case in U.S. District Court, Northern District of California is Angel Fraley et al., individually and on behalf of all others similarly situated vs. Facebook Inc., 11-cv-1726.

Source (Reporting by Dan Levine in Oakland, Calif.; editing by Matthew Lewis and M.D. Golan)