How Facebook Makes Money Off Your Life

How Facebook Makes Money Off Your Life

Facebook really needs to start making more money, or its stock will soon be worth about as much as a shopping bag full of mulch. How do they do that? Ads! New ads. But these new ads involve your life.

Facebook spilled the beans on its new stab at ad cash in a public blog post that most people will never even read. So, we’ll break down each section for you in Human English. Let’s begin: here’s what’s changing.

Facebook Exchange (FBX), or “We Watch What You Browse”

Facebook can now make an agreement with another website to swap (for money) information and sell things to you. Let’s say you visit J.Crew’s site and check out a new tie you like. If Facebook and J.Crew have an FBX agreement, you could see an ad for that very tie as soon as you hop back over to Facebook. How? The two companies will share information based on the cookies my browser stores. Facebook says “we only work with providers that agree to technical and policy requirements that protect the privacy of personal information”, and I have no idea what that means.

Facebook Will Trade Your Phone Number with Another Company

Here’s another scenario: let’s say J.Crew has my phone number, because you’ve given it to them through a past order. And let’s also say this phone number is listed on your Facebook profile, which it very possibly is. J.Crew can now ask Facebook (in exchange for money) to give you an ad — you specifically — instead of your vague demographic segment. This of course works in bulk: Nike could ask Facebook to hit everyone who’s ever used their email address with with an ad for new Dunks.

There’s a privacy upshot here, however, says Facebook:

The store can provide us with “hashes” of their customers’ email addresses so that we can show those same people the ad without the store having to send us the actual email addresses. These hashes are bits of text that uniquely identify a piece of data (such as an email address) but are designed to protect against reverse engineering which would reveal that data.

If your email address and/or phone number are sent via encoded hashes, they should be safe from interception and decoding, assuming it’s done properly.

Facebook now follows what you buy online

Not everything, but some things:

Finally, we recently partnered with a company called Datalogix to offer marketers a way to measure how their ads on Facebook drive sales for their products in stores. This allows marketers to better understand the value of the investments they are making in Facebook and helps us provide advertising that is more interesting to our users.

This means, simply, that Facebook can ask for more money if they have proof that Facebook’s ads lead to an advertising partner sell more stuff. Facebook says this shopping information will only lump you in with “large groups of people who did or did not see an ad.” Facebook claims “we had an industry-leading auditing firm evaluate the privacy implications of this process. The auditor confirmed that, throughout this process, Datalogix is not allowed to learn more about you from Facebook profile information.” I have no idea what this means.

The post concludes with something of an apologia:

Advertising helps keep Facebook free. We believe we can create value for the people who use our services every day by offering relevant ads that also incorporate industry-leading privacy protections. In our view, this is a win-win situation for marketers and for you.

It’s true. Either deal with increasingly precise advertising that’s based more and more on your life outside of, or there won’t be a Facebook. [Facebook via Forbes]