By Deepa Seetharaman, Georgia Wells and Suzanne Vranica
Facebook Inc. is curbing the information that it exchanges with
companies that collect and sell consumer data for advertisers, as
the social-media giant tries to calm an uproar over its handling of
personal information.
The measures, part of which Facebook announced late Wednesday,
affect a group of so-called data brokers such as Acxiom Corp. and
Oracle Corp.'s Oracle Data Cloud, formerly known as DataLogix, that
gather shopping and other information on consumers that Facebook
for years has incorporated into the ad-targeting system that is at
the core of its business.
Facebook said it is ending an ad-targeting option called Partner
Categories that lets such data brokers target specific groups of
Facebook users -- people who buy a certain product, for example --
on behalf of their ad clients. Facebook believes shutting that
system down "will help improve people's privacy on Facebook,"
Graham Mudd, product marketing director at Facebook, said in a post
Wednesday.
In addition, Facebook is halting its practice of providing
anonymized data from its platform to such information brokers that
they use to measure the effectiveness of their ad campaigns, said
people familiar with the matter. But the company is trying to find
more secure ways to share data with these brokers to measure ad
performance, one of the people said, at a time when advertisers are
clamoring for data that proves that Facebook ads work.
Facebook is making the changes as part of a broader internal
review of how it handles user information. The company is reviewing
its relationship with data brokers in part because it is concerned
about how those firms are obtaining their data and how accurate it
is, one of the people said.
Acxiom on its website says that it takes a "proactive approach
in protecting consumer privacy," and looks for ways "to protect and
assure appropriate use of information related to consumers and to
promote policies within the industry that do the same."
Oracle declined to comment.
Facebook has battled criticism over its user-data practices
since it said on March 16 that personal information was improperly
obtained by Cambridge Analytica, a data-analytics firm that worked
for the 2016 Trump campaign.
Chief Executive Mark Zuckerberg apologized last week for a
"major breach of trust" in that episode and outlined steps the
company has taken and plans to take to better protect user data. On
Wednesday, the company also announced measures to make it simpler
for users to examine and change some of the data about them that
the social network tracks.
Curbing its relationships with data brokers could affect
Facebook's value proposition to advertisers, removing a layer of
information that has helped some marketers target ads with greater
precision. But the impact is likely to be limited, industry
executives said.
Facebook's partnership with data providers has particularly
helped brands that lacked detailed customer data, such as consumer
packaged-goods makers, said Lance Neuhauser, CEO of 4C Insights, a
digital-ad service provider. However, he said, advances in
Facebook's own targeting capabilities have "made the need for some
of this third party targeting a little less important."
Facebook and other internet companies also are under pressure
from European Union authorities to make sure all of its targeting
data is collected with user permission, as part of the EU's General
Data Protection Regulation scheduled to take effect in May.
Verifying that could be difficult with data from brokers, Mr.
Neuhauser said.
In a memo to advertising agencies, Carolyn Everson, Facebook's
vice president of global marketing solutions, said the data-broker
relationships would be phased out in six months. Advertisers can
still target audiences on Facebook but they must use "data that
they have the rights, permissions, and lawful basis to use," she
said. "We understand this may impact your clients advertising
efforts on our platform, and we will work with you through this
transition."
While Facebook has a huge amount of data on users -- sites
they've liked, their interests and detailed demographic
information, even their chat history -- brokers such as Acxiom,
Oracle Data Cloud, and Epsilon Data Management LLC have reams of
information on people's purchases, household income and other
characteristics.
That information is matched to Facebook profiles, allowing
brands to target ads at people who have bought certain products --
and extend those campaigns to Facebook users with similar
characteristics. These relationships helped Facebook beef up its
ad-targeting capabilities in recent years, former employees
say.
The extent of the possible impact on Facebook of removing
third-party data isn't clear. The company's trove of data is hugely
valuable on its own. And many marketers have their own consumer
data that they upload to Facebook and use in ad campaigns--a
practice not affected by the new changes.
Still, some big ad categories will be hampered. "This will be
brutal for advertisers" that do not have first party data on their
customers such as consumer product companies who depend heavily on
the information from third party data firms, said one ad buyer. The
move also could affect auto advertisers who use things such as data
that identifies people in the market shopping for a new car, said
another ad buyer.
The change also is a blow to the data companies. Shares in
Conway, Ark.-based Acxiom, which has had a relationship with
Facebook since 2013, fell 8.4% in trading Wednesday, before
Facebook's plans were disclosed, and dropped nearly 11% more in
after-hours trading.
The data companies vacuum up consumer information from a variety
of sources, including public records and transactions with
retailers. They are able to build profiles detailing everything
from people's grocery store purchases to the cars they own to their
magazine subscriptions. Much of this activity is done without the
knowledge of consumers.
A 2014 report by the Federal Trade Commission found that data
brokers collect and store data on nearly every U.S. consumer, and
that one company alone added more than three billion new data
points to its database each month. The report recommended more
transparency in the industry.
--Douglas MacMillan contributed to this article
Write to Deepa Seetharaman at Deepa.Seetharaman@wsj.com, Georgia
Wells at Georgia.Wells@wsj.com and Suzanne Vranica at
suzanne.vranica@wsj.com
(END) Dow Jones Newswires
March 28, 2018 23:34 ET (03:34 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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