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What You Didn’t Post, Facebook May Still Know

Somini Sengupta
Tuesday, 26 Mar 2013 | 3:05 AM ET
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Debra Aho Williamson, an advertising industry analyst and devoted coffee drinker, was intrigued by a promotion that popped up on her Facebook page recently. Sign up for a Starbucks loyalty card, it said, and get $5 off.

"When I saw that, I thought, I'm already a member of their loyalty club," she said. "Why don't they know that?"

Despite the streams of data Facebook has collected about people like Ms. Williamson, the social network needs to know its users much better if it is going to become, as the company hopes, the Web's most effective advertising platform. And Facebook is scrambling to do just that.

In shaping its targeted advertising strategy, it is no longer relying solely on what Facebook users reveal about themselves. Instead, it is tapping into outside sources of data to learn even more about them — and to sell ads that are more finely targeted to them. Facebook says that this way, marketers will be able to reach the right audience for the right products, and consumers will see advertisements that are, as the company calls it, "relevant" to them.

In late February, Facebook announced partnerships with four companies that collect lucrative behavioral data, from store loyalty card transactions and customer e-mail lists to divorce and Web browsing records.

They include Acxiom, which aggregates data from a variety of sources, including financial services companies, court records and federal government documents; Datalogix, which claims to have a database on the spending habits of more than 100 million Americans in categories like fine jewelry, cough medicine and college tuition; and Epsilon, which also collects transaction data from retailers.

Acxiom and Datalogix are among nine companies that the Federal Trade Commission is investigating to see how they collect and use consumer data.

Facebook's fourth partner is BlueKai, based in Cupertino, Calif., which creates tracking cookies for brands to monitor customers who visit their Web sites. That data can be used to show an advertisement when those users log on to Facebook.

"Our goal is to improve the relevance of ads people see on Facebook and the efficacy of marketing campaigns," Gokul Rajaram, product director for ads at Facebook, said in an interview on Friday.

In announcing the partnerships, Facebook said it would allow, for instance, a carmaker to customize an advertisement to users interested in a new car.

The push to refine targeted advertising reflects the company's need to increase its revenue. Its shares are worth far less than its ambitious initial public offering price of $38 a share last May, and Wall Street wants to see it take concrete steps to prove to advertisers that it can show the right promotions to the right users and turn them into customers.

The partnerships are part of a continuum of efforts by Facebook to hone targeted advertising. Last fall, it invited potential advertisers to provide the e-mail addresses of their customers; Facebook then found those customers among its users and showed them ads on behalf of the brands.

JackThreads, a members-only online men's retailer, tried this tactic recently. Of the two million customer e-mails it had on file, Facebook found more than two-thirds of them on the social network, aided in part by the fact that JackThreads allows members to sign in using Facebook login credentials. Facebook then showed those customers ads for the items they had once eyed on the JackThreads site.

The nudge seemed to get people to open up their pocketbooks. Sales increased 26 percent at JackThreads, according to AdParlor, an agency that buys the company's advertisements on Facebook.

Targeted advertising bears important implications for consumers. It could mean seeing advertisements based not just on what they "like" on Facebook, but on what they eat for breakfast, whether they buy khakis or jeans and whether they are more likely to give their wives roses or tulips on their wedding anniversary. It means that even things people don't reveal on Facebook may be discovered from their online and offline proclivities.

Facebook says that in devising targeted ads, no identifying information about users is shared with advertisers. E-mail addresses and Facebook user names are encrypted and then matched. Users can opt out of seeing specific brand advertisements on their page, and they can opt out of receiving any targeted messages by visiting each third-party data partner's Web site.

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That is a somewhat complicated process, though, which has prompted the Electronic Frontier Foundation to issue step-by-step instructions. The foundation suggests that consumers who want to avoid ubiquitous tracking install tools to block Web trackers and be mindful about sharing their e-mail addresses with marketers. Facebook declined to provide data on how often users opt out of seeing ads.

"It's ultimately good for the users," Mr. Rajaram said. "They get to see better, more relevant ads from brands and businesses they care about and that they have a prior relationship with."

He added, "There is no information on users that's being shared that they haven't shared already."

Whether Facebook users will enjoy seeing "relevant" ads or be alienated by more intensive tracking remains to be seen.

At the very least, said Ms. Williamson, an analyst with the research firm eMarketer, consumers will be "forced to become more aware of the data trail they leave behind them and how companies are putting all that data together in new ways to reach them." She knows, for instance, that if she uses her supermarket loyalty card to buy cornflakes, she can expect to see a cornflakes advertisement when she logs in to Facebook.

After all, she said, "data is the new currency of marketing."

These efforts speak volumes about the data trail that consumers leave every day, online and off — a trail that can follow them back to Facebook or to any other advertising platform on the Web. They offer lucrative information every time they provide their e-mail address to a dressmaker or a doctor, and even when they give their ZIP code at the checkout counter. They use loyalty cards to buy snorkeling gear or antidepressants. They browse a retail Web site, leaving a detailed portrait of whether they are interested in ergonomic work chairs or nursery furniture.

Facebook said it was too early to reveal details about how the data collected through its new partnerships would be put to use by marketers.

1-800-Flowers, the online florist, said it had been experimenting with targeted ads on Facebook. What the company was most looking forward to was a new advertising conceit, which Facebook calls Lookalike, that would allow 1-800-Flowers to show its ads to other Facebook users who are similar to the company's known customers.

Christopher G. McCann, president of 1-800-Flowers, said he had no idea how Facebook planned to identify "look-alikes," only that it had promised to find potential new customers through a proprietary algorithm that matches demographic traits.

Last year, Facebook also introduced a so-called retargeting campaign. A travel Web site could track what its customers were looking at — hotels in New York, for instance — and show those customers an ad once they logged on to Facebook. The tracking is done by a piece of code embedded in the travel company's site.

For marketers, more data could mean getting closer to the ultimate goal of advertising: sending the right message to the right consumer at the right time.

When Facebook announced its targeted ad offerings, Justin Bazan, an optometrist in Park Slope, Brooklyn, immediately saw an opportunity for his business. He combed through his office records for the e-mail addresses of patients who were overdue for an annual exam. Facebook matched most of those e-mails to Facebook user names, and Dr. Bazan paid $50 to show those users an advertisement. "You're overdue," the ad read. "Click here to make an appointment."

Within a week, more than 50 people had clicked on his ad, he said.

Dr. Bazan dismissed concerns about federal confidentiality laws that protect health information. Facebook, he said, encrypts the e-mail addresses furnished by any advertiser, including doctors.

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