Gunning to win more advertising dollars, Facebook Inc. (FB) is
using new ways to cull personal information from outside the social
network and match it with data submitted by its billion-plus
users.
The efforts are winning over advertisers such as General Motors
Co. (GM) and Neiman Marcus Group Inc., but further raise privacy
concerns as Facebook harnesses a mosaic of information about its
users.
On Wednesday, Facebook plans to roll out a new advertiser tool
to help advertisers directly target Facebook users based on their
offline spending history.
The tool marries what Facebook already knows about people's
friends and "likes' with vast troves of information from
third-party data marketers such as Datalogix Inc., Acxiom Corp.
(ACXM) and Alliance Data Systems Corp.'s (ADS) Epsilon. That
includes data on the Web pages that consumers visit, the email
lists they have signed up for, and the way they are spending money
online and offline.
A data broker like Datalogix, for example, aggregates
information about which items and brands a consumer buys through
sources like loyalty-card programs. Through software that obscures
users' identifying information such as email addresses and phone
numbers, Datalogix and Facebook can combine their databases, and
group users based on their offline purchases. Then, through the
"partner categories' tool, brands can select which groups should
see their advertisements.
A review of the "partner categories' tool by The Wall Street
Journal found that categories often apply to tens of millions of
people--for instance, there are some 20 million U.S. users who are
heavy juice buyers on the social network.
A small chocolatier can target young parents in New York who buy
lots of organic food products, for example. Hyundai Motor Co.
(005380.SE) recently ran a test to send ads to people identified as
"intenders," or those likely to buy a car soon based on their use
of auto-research sites.
While Facebook doesn't provide data on individuals to
advertisers, it now can feed advertisers information on broad
swaths of its members, including their behavior outside of the
social network.
The latest moves sit uneasily with some members who are worried
that Facebook knows too much about their lives.
As it broadens its network of data partners, Facebook is
creating an increasingly detailed composite of their behavior, from
what products they're buying at the drugstore to sexual preferences
and predicting what big purchases they may be contemplating.
"There's no place to be left alone," said Jeffrey Chester,
executive director of the Center for Digital Democracy, a
Washington, D.C., policy advocacy group. He said Facebook's
relationship with data partners could become more worrisome if
Facebook leverages the location data it passively collects from
mobile devices to sell ads.
Mr. Chester added that he has asked the Federal Trade Commission
to investigate Facebook's targeting efforts. Separately, the FTC
has said it is looking into how nine data brokers, including
Datalogix and Acxiom, are collecting and using information about
customers.
The FTC and Acxiom didn't immediately return requests for
comment. Datalogix Chief Executive Eric Roza said in a statement:
"The intersection of online advertising and marketing data is
evolving rapidly, and Datalogix has been happy to help the FTC
increase its understanding of our industry."
Facebook said it isn't using location data from smartphones to
target ads and that it has created a program to make anonymous data
between itself and its data partners. Facebook members can also
click on ads for information on why they were targeted and can opt
out of future ads from that specific advertiser or from receiving
all targeted ads from each data partner.
"We are committed to building things that make it clear to
people how their privacy is protected and how they can control the
ads they see," said Brian Boland, Facebook's director of product
marketing, of his message to advertisers.
Mr. Boland said the extended web of data is aimed at serving
more relevant ads to consumers and convincing advertisers that
activity on the social network leads to actual transactions.
General Motors, for one, is returning to advertising on Facebook
on a trial basis after walking away nearly a year ago. Using the
new tool, the auto maker is targeting younger buyers who might be
interested in its Chevrolet Sonic subcompact car, said two people
familiar with the matter. The Sonic promotions are only exploratory
at this point, and GM remains cautious after dropping Facebook as
an advertising resource in May 2012.
Neiman Marcus Group also is ramping up its ad spending on the
social network after cutting back two years ago. The company
previously could only target ads based on limited actions on
Facebook--such as a user's "like" of a company page. Now the
upscale retailer can push mobile or desktop ads specifically to
Facebook users who regularly spend on high-end apparel or those who
looked online at making a clothing purchase but didn't pull the
trigger.
"Facebook was a black box," but "now we can deliver targeted
communications," said Neiman Marcus's vice president of digital
marketing, Aaron Shockey. Mr. Shockey said early data suggest
Facebook ads using the targeting methods are comparable to Google
Inc.'s (GOOG) search ads in driving sales. He declined to be
specific or to comment on how much spending on Facebook ads has
increased.
How much the ad targeting has helped Facebook's business is
unclear, since the Menlo Park, Calif., company doesn't break out
revenue from specific ad products. But in Facebook's first
quarter--the first full quarter after the debut of some key
targeting products--advertising revenue rose 40.9% from a year
earlier to $1.3 billion.
Shiv Singh, head of digital for PepsiCo Inc.'s (PEP) beverage
business, said PepsiCo's spending on Facebook ads has gone from
modest to "significant" since the social network introduced
targeted ad products. He said he was long skeptical of Facebook
"likes' because it provided little clarity on how those users buy
soda.
But now Mr. Singh said he can show different ads based on
whether a user regularly buys Diet Pepsi, is a Pepsi loyalist or is
a so-called Pepsi switcher--someone who tends to flip between Pepsi
and its rivals and is typically more price sensitive.
"That's really powerful and unique," Mr. Singh said. He added
that his group's more targeted marketing efforts on Facebook reach
18 million to 20 million people every month versus less than three
million a year ago.
Sean Williams, social media manager for Hyundai's America group,
said he was also pleased with a recent Facebook ad campaign that
helped result in a 28% lift in sales. Mr. Williams said Hyundai
plans to tinker with Facebook's targeting tools over the next year
to find new ways to reach high-potential consumers.
"In the past, we really just used Facebook as an engagement
tool," Mr. Williams said. "We're now thinking about turning this
into an evergreen, or always on, program."
-Jeff Bennett contributed to this article.
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