In an attempt to find out which ads lead to purchases, Facebook is partnering with Datalogix, a company that compiles consumer purchasing data from retail stores. But the move has privacy advocates asking federal regulators to scrutinize the deal.
Marc Rotenberg, president of the Electronic Privacy Information Center, told CNET today that he will ask the Federal Trade Commission to investigate the new Facebook-Datalogix deal and determine whether the business practice complies with the terms of a recent $9.5 million agreement Facebook reached with the FTC to settle privacy complaints.
"In light of the recent consent order with Facebook, which resulted from the complaint brought by EPIC and other consumer privacy groups, it is critically important for the FTC to look closely at this proposal and to determine whether the company is complying with the terms of the settlement.
Under terms of that settlement, which was finalized last month, Facebook agreed to obtain users' "express consent" before sharing any information that exists outside the auspices of its privacy settings and to provide users with "clear and prominent notice" anytime their information is shared.
"I believe the FTC should be investigating all this as part of its review under the consent decree," Jeff Chester, executive director of the Center for Digital Democracy, told CNET. He is particularly concerned about the combining of online and offline consumer data and said it should only be used with prior consumer permission. "Ad exchanges allow them to take this data and apply it in real-time and sell it to the highest bidder including Facebook. They are using reams of additional data, including from online, to target Facebook users," he added.
A Facebook spokeswoman provided this statement: "We are working with Datalogix to help advertisers understand how well their Facebook ads are working. We also do this through our partnerships with companies like Nielsen and comScore and through our own advertising tool. We know that people share a lot of information on Facebook, and we have taken great care to make sure that we measure the effectiveness of Facebook ads without compromising the commitments we have made on privacy. We don't sell people's personal information, and individual user data is not shared between Facebook, Datalogix or advertisers."
An FTC spokeswoman did not respond to a voicemail message.
Brad Smallwood, Facebook's head of measurement and insights, told CNN that "We kept hearing back (from marketers) that we needed to push further and help them do a better job."
Datalogix matches e-mail addresses and other consumer information associated with retailers' loyalty programs against e-mail addresses and other identifying information people used to establish their Facebook accounts. It says it keeps the information anonymous and aggregates it into groups of people who saw the ads and those who did not, according to the CNN report. Datalogix then compiles a report and provides it to Facebook and its advertisers.
The companies have studied 45 ad campaigns and in 70 percent of the cases, marketers earned an additional $3 in incremental sales for every $1 spent on Facebook, the CNN report said.
Updated 6:14 p.m. PT with Sarah Downey comment and 4:27 p.m. PT with Facebook comment.