How Facebook Uses Your Personal Data To Target Ads, Even Offline

If you feel like Facebook has more ads than usual, you aren't imagining it. Facebook has been inundating us with more and more ads lately, and using your information — both online and offline — to do it. Here's how it works, and how you can opt out.

For most people, Facebook's advertising system is insider stuff for marketers that doesn't really affect how we use the service. But as the targeted ads — the advertisements that take the data you provide to offer ads specific to you — get more accurate and start pulling in information from other sources (including the stuff you do offline), it's more important than ever to understand the system. To figure out how this all works, I spoke with Elisabeth Diana, manager of corporate communication at Facebook. Let's kick it off with the basics of how the targeted ads work online before moving on to some of the changes we'll see once offline shopping data gets included.

How Facebook Uses Your Profile To Target Ads

We've talked before about how Facebook uses you to annoy your friends by turning your likes into subtle ads. This method of sponsored posts is deceptively simple.

The most obvious example of a targeted ad uses something you like — say Target — and then shows an ad on the right side or in the newsfeed that simply says "[Name] likes Target." What you and your friends like helps determine what everyone on your friends list sees for ads. Any ad you click on then increases the likelihood of another similar ad.

It's not just what you and your friends are doing that generates ads though; it's also basic demographic information. Diana notes that this might be more information than you think, such as "major life events like getting engaged or married". So, if you're recently engaged and note that on Facebook, you'll see ads about wedding planning.

When an advertiser creates an ad on Facebook, they can select all sorts of parameters so they reach the right people. A simple example of a parameter would be: "Someone engaged to be married, who lives in New York, between the ages of 20-30." That's simple, but advertisers can actually narrow that down to insane specifics, such as "Someone engaged to be married, who lives in New York, between the ages of 20-30, who likes swimming, and who drives a BMW." If your profile fits those parameters, you'll probably see the ad. If you want to see how it works, you can even try your hand at creating an ad.

It boils down to this: the more information you put about yourself on Facebook — where you live, your age, where you attended university, the companies, brands, and activities you like, and even where you work — determines what kind of ads you'll see. This means ads are (in theory) more relevant to you.

What Happens When You Don't Like Or Share Anything

The way Facebook targets ads is based on the information you provide. Using your likes, location, or age, Facebook puts you in a demographic and advertises to you. But what happens when you don't include any of that information on your profile? It turns out that your friends are used to fill in the gaps.

Even a barebones profile has a few bits of information about you. You probably at least have where you live and your age. That, combined with the information your friends provide, creates a reasonable demographic profile that advertisers can still target. The ads won't be as spookily specific to you as might happen if you provide a lot of data, but they'll be far more accurate than a television ad on your favourite show.

How To Keep Facebook From Tracking You Online

We know Facebook is tracking what you're doing. That can be unsettling if you're concerned about your privacy and you don't want your online habits contributing to advertisements, or if you don't like the idea of Facebook collecting data about you that you're not consciously providing. Here are a few tools to cut back on tracking:

  • Facebook Disconnect for Chrome and Firefox: Facebook is notified when you visit a page that uses Facebook Connect (the little "Like" button you find on most web sites, including ours), and that data can be used to target ads. Facebook Disconnect stops that flow of data.
  • Facebook Privacy List for Adblock Plus: This subscription for Adblock Plus blocks Facebook plugins and scripts from running all over the web so your browsing data doesn't get tied to your Facebook account.
  • DoNotTrackMe: DoNotTrackMe is another extension that blocks trackers and anyone who wants to collect your browsing data to create targeted ads.

You may also want to opt out of the Facebook Ads that use your actions (liking a page, sharing pages, and so forth) to promote ads to your friends:

  1. Click the gear icon when you're logged into Facebook.
  2. Click the "Ads" tab on the sidebar.
  3. Click "Edit" under "Third Party Sites" and change the setting to "No one".
  4. Click "Edit" under "Ads & Friends" and select "No One". This disables Social Ads.

That takes care of the online advertising. Be sure to check out our guide to Facebook privacy for more information about those settings. You can also hide your likes from your profile so they're not as prominent. If you don't actually mind the advertising, but want to improve the ads shown to you, you can always click the "X" next to any ad to get rid of it.

How Facebook Uses Your Real World Shopping To Target Ads

Using information in Facebook profile to target ads is old news. However, a few recent partnerships mean that Facebook is also planning to use what you buy in actual physical stores to influence and track the ads you see.

To do this, Facebook is combining the data it already has with information from data collection companies such as Datalogix, Acxiom, Epsilon, and BlueKai. To date, these partnerships are fairly US-centric; we're not yet aware of Facebook partnering with any of the major Australian loyalty schemes (a field dominated by the supermarket chain schemes and airline frequent flyer arrangements). With that said, it's only a matter of time before those kind of deals are made. It's also worth remembering that if you shop online from overseas stores, your data may well reside with these kinds of agencies already. So it's worth being aware of the possibilities, even if they're less evident in Australia than they would be in the US.

How much do these data collecting companies know? According to The New York Times: way more than you'd think, including race, gender, economic status, buying habits, and more. Typically, they then sell this data to advertisers or corporations, but when it's combined with your information from Facebook, they get an even better idea of what you like, where you shop, and what you buy. As Diana describes it, Facebook is "trying to give advertisers a chance to meet people both on and off Facebook," and make advertisements more relevant to you.

How Real-Life Ad Tracking Works

The most shocking thing you're going to find on Facebook is when something you do in the real world — such as buying a car or using a supermarket loyalty card — actually impacts the ads you see. This is no different than any other direct marketing campaign, but seeing it on Facebook might be a little unsettling at first. As well as the data collection agency details, this can also occur if advertisers make use of Facebook's custom audiences option.

Custom audiences allow an advertiser to upload an email list and compare that data (privately) with who's on Facebook. Diana offered the simple example of buying a car. Let's say you purchase a car from a dealership, and you give them your email address. That dealership wants to advertise on Facebook, so it uploads a list of all the email addresses they have and Facebook identifies if users are signed up via that address. As a result, might see an ad from that dealership on Facebook for a discounted tune-up. Additionally, Lookalike audiences might be used to advertise to people similar to you because you purchased a car there. That might mean your friends (assuming you're all deemed 'similar') will see the same ad from the dealership.

The custom audiences feature can be used by any company advertising on Facebook. So, if you're on your dentist's email list, or that small bakery around the corner snagged your email for a free slice of pie, they can potentially reach you through this system.

A new targeting feature, Partner categories, takes the data collected by these third-party data brokers and puts you into a group. So, if you're in a group of people who buys a lot of frozen pizza, you'll see ads for frozen pizza, and maybe other frozen foods.

It's important to remember that this is all information that you're already providing. Facebook is using data collected by outside companies to create a more accurate portrayal of you so marketers can advertise to you directly.

How Your Data Is Kept Private

All of this information being exchanged should make the hairs on the back of your neck stand up a little. If anything goes wrong, it could leak a bunch of your private information all over the place. To keep your information private, Facebook uses a system called hashing.

First, your personal information like email and name is encrypted. So, your name, login info and anything else that would identify you as a person goes away. Then, Facebook turns the rest of the information into a series of numbers and letters using hashing. For example, Age: 31, Likes: Lifehacker, Swimming, BMW's, Location: New York, turns into something like, "342asafk43255adjk." Finally, this information is combined with what the data collection companies have on you to create a better picture of your shopping habits so they can target ads. Slate describes the system this way:

What they came up with was a Rube Goldbergian system that strips out personally identifiable information from the databases at Facebook, Datalogix, and the major retailers while still matching people and their purchases. The system works by creating three separate data sets. First, Datalogix "hashes" its database — that is, it turns the names, addresses and other personally identifiable data for each person in its logs into long strings of numbers. Facebook and retailers do the same thing to their data. Then, Datalogix compares its hashed data with Facebook's to find matches. Each match indicates a potential test subject-someone on Facebook who is also part of Datalogix's database. Datalogix runs a similar process with retailers' transaction data. At the end of it all, Datalogix can compare the Facebook data and the retail data, but, importantly, none of the databases will include any personally identifiable data — so Facebook will never find out whether and when you, personally, purchased Tide, and Procter & Gamble and Kroger will never find out your Facebook profile.

From the advertisers' point of view, the flow of information doesn't reveal personal details. It just tells them how many potential customers might see an ad. "An advertiser would learn something like, 'about 50% of your customers are on Facebook,'" says Diana, "But they don't know who you are." Image by Jorge Stolfi.

Those are the basics of how Facebook's various targeted advertising systems work. Of course, a lot of complex maths and algorithms are in place to actually generate this data, but it really boils down to how much information you're making public — whether you're aware of it or not — that makes the system tick. If you like the targeted ads, they should improve even more as the years go on. If you don't, opting out is always an option.


Comments

    I know this is where the future is going, and I know that I'm a hypocrite, but targeted ads make me uncomfortable. I'll gladly tell Google Now to go through my Gmails and tell me when I'm due to book into a hotel, or tell it where I work and where I live so it can give me traffic and navigation information, but that info isn't used for advertising (at least I don't think?)

    Offline tracking is scary too. It's nice to get away from the internet and just anonymously stroll around a large shopping centre without coming back to find out that your trip has been used to target clothing ads to you or whatever.

      I'd be highly surprised if your Gmail emails and Navigation trips aren't used by Google for targeted advertising. Google doesn't make its money off free services, after all.

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