In 2007, when Mark Zuckerberg introduced Facebook’s first serious advertising initiative to an audience of Madison Avenue executives, he proposed a new approach to marketing: his three-year-old company would use people’s connections with their friends to bring more credibility to ads. “Social actions”—such as “liking” Sprite’s page on Facebook—“are powerful because they act as trusted referrals and reinforce the fact that people influence people,” Zuckerberg said.
But by the time Facebook went public, in 2012, and began disclosing its financial performance to investors, questions had arisen about the company’s strategy. Users found it irritating that they had become unwitting advocates for the brands whose pages they had happened to like, often on a whim, and advertisers weren’t sure the social approach to advertising even worked. In a 2012 article, Shayndi Raice, of the Wall Street Journal, described a meeting at which Zuckerberg had addressed a group of ad executives. The attendees wanted to know how they could be sure that they were making a return on their investment in Facebook ads. One person remembered Zuckerberg answering, “That’s a great question and we should probably have an answer to that, shouldn’t we?”
On Monday, when the company announced a significant expansion of its advertising ambitions—a plan to target ads to people on sites outside of Facebook, for the first time, using personal information gathered on Facebook—it was apparent that Zuckerberg and his marketing executives had come up with an answer.
In the past few years, Facebook has focussed far less on pushing its theories about social influence and far more on providing advertisers with metrics showing that its ads work. Last year, the company bought an advertising platform called Atlas, which tracks the effectiveness of online ads. In a blog post introducing the advertising program for third-party sites, Erik Johnson, the head of Atlas, wrote of “bridging the gap between online impressions and offline purchases”—in other words, showing a return on advertisers’ investments.
The return Facebook is now able to demonstrate has less to do with users’ influence among their social networks and more to do with something more prosaic: over the years, Facebook has learned a lot about you and its hundreds of millions of other users. This knowledge has coincided with the rise, in online advertising in general, of ads that are targeted to you based on your demographics and your behavior, such as which Web sites you’ve visited—the approach that explains why, after you considered buying a pair of shoes online but changed your mind, you started seeing shoe ads on other sites. Studies have shown that ads are more effective—that is, they’re more likely to translate into Web site visits and purchases—when they’re targeted like this.
Typically, this kind of targeting involves using bits of data called cookies to keep track of the sites you’ve visited. But Facebook also has access to the personal information it gathers through its own site, and it realized that it could use this information to tailor ads on Facebook itself. This approach has made the company’s ad program incredibly successful in the past few years. According the research firm eMarketer, Facebook’s share of worldwide revenue from digital advertising—including both computers and mobile devices—currently stands at eight per cent, second only to Google’s thirty-two per cent. With the expansion of Atlas, when you visit a third-party Web site while you’re logged into Facebook on your computer or phone—even if you don’t have the site itself open at the time—Facebook will serve the Web site a targeted ad based not only on cookies but on the data it has about you. So if Pepsi wants to show an ad to women between the ages of twenty-five and thirty-five who live in New York and are fans of the Giants, Facebook can now do so, not only on its site but on any site that uses its service. (For now, Atlas is targeting ads on third-party sites based only on age and gender, though it may add other factors like location and interests in the future.) Erik Johnson’s blog post also notes that Atlas’s reliance on user data gives it a distinct advantage in the growing market for ads on smartphones, where cookie-based tracking is limited.
All of this is, of course, bound to raise questions about privacy. Facebook points out, as it has in the past, that it doesn’t show your data to the advertiser or to the third-party Web site—it just uses it to target the ad appropriately. A Facebook spokesman also told me that Atlas will give people “control over their ads experience” and “will honor the choices people make via industry-standard opt outs”—that is, it will allow users to ask not to be shown targeted ads. I couldn’t find a description of how these opt-outs will work for the new program on Facebook’s Web site. The spokesman directed me to a privacy policy on a separate Atlas Web site that explains how you can opt out of receiving targeted ads, but the page notes that, even if you opt out of seeing the ads that result from targeting, Atlas will still “collect the same information when you browse the Web, see or click on an advertisement that we deliver or measure, or use one of our advertisers’ apps.”
A 2012 privacy settlement between Facebook and the Federal Trade Commission included a consent order requiring, among other things, that Facebook not misrepresent how it collects and discloses its users’ information. Marc Rotenberg, the president of the Electronic Privacy Information Center, told me that his organization wants the F.T.C. to look into whether Facebook may be violating that order with the new program, by not disclosing its existence as prominently as it might (for example, by notifying people as soon as they sign onto Facebook). When I contacted the F.T.C., a spokesman said that the commission doesn’t comment on whether companies are adhering to consent orders, nor whether the F.T.C. is investigating possible violations. A representative from the office of the Data Protection Commissioner of Ireland, where Facebook has its European headquarters, said in an e-mail that the office “is involved in ongoing discussions with Facebook” about the Atlas expansion.
Underlying privacy advocates’ concerns is the general move toward selling ads based on user data. Facebook’s announcement entails a challenge to Google, which already targets some ads on sites around the web, based on what it knows about people from their use of Google Plus and YouTube. Google also personalizes the ads that show up next to search results, based partly on people’s previous searches, and it delivers Gmail ads based partly on the language in its users’ e-mails. As advertisers increasingly seek to target their ads based on personal information, the company that will be most successful will inevitably be the one that can gather the most information about its users.
