I was fascinated as I watched Facebook CEO Mark Zuckerberg’s testimony in April before a committee in the U.S. Senate where he explained how Facebook makes $11 million per day by selling digital advertisements to companies and then directing those ads to likely customers who also happen to be members.
While Zuckerberg only makes $1 per day in salary, his $52 billion fortune from Facebook equates to about $4 million per day in profits. Not bad for a college dropout who started The Facebook in his Harvard dorm room with several geeky friends, who are also now millionaires several times over.
As I watched Zuckerberg assuring senators that Facebook members have some control over the type of ads they are presented by adjusting privacy settings and ad preferences, I thought maybe there was a health care story here for Crain’s.
I had written back in Sept. 13, 2010 a Health Care Extra feature package and a related blog about health care advertising. Five years later I wrote another story about the changing nature of health care advertisements when digital ads were just beginning to get started in health care. Clearly an update was needed.
Zuckerberg plainly admitted to senators that Facebook’s business model is to sell ads and make money. But he also talked quite convincingly that his original goal of bringing people together for whatever purposes they wanted was still in his DNA and very much a goal for Facebook.
He also admitted mistakes. “I think it’s — it’s pretty much impossible, I — I believe, to start a company in your dorm room and then grow it to be at the scale that we’re at now without making some mistakes,” Zuckerberg said.
This was one of several instances in the hearing he apologized for not doing enough to protect an estimated 87 million of Facebook’s users from having data extracted from their accounts without their knowledge by England-based Cambridge Analytica. Cambridge has since filed for bankruptcy. Facebook, which is undergoing an investigation by the New York attorney general’s office and the Federal Trade Commission, has implemented new safeguards for members and more people are double-checking their privacy and advertising settings.
I also learned by reporting and writing the June 4 story on digital health care advertising that over the past several years, hospitals, health insurers and other medical providers are moving millions of dollars of advertising and marketing dollars from traditional print, radio and television and into a new digital realm using the Internet-based marketing strategy called “microtargeting.”
This microtargeting strategy — knowing your customers and specifically giving them an ad they might want to see — is something that I suppose I knew was happening underneath all my posting and clicking Likes on posts from my friends and family.
During the congressional hearing, several senators made some insightful and some obviously uninformed or naive statements about the Internet. Quite honestly, I was probably was just as confused as some of the senators who speculated, sometimes inaccurately, how their posts were being used by Facebook.
Like most people, I use these social media sites to follow and chat with my family, former colleagues, and high school and college friends. I find out a lot of stuff that I normally would have no clue except maybe at a reunion or chance meeting somewhere.
But when Sen. Bill Nelson of Florida began talking about his posts on chocolate, my ears perked up. Does Facebook really track my posts, as Nelson suggested?
Nelson declared that Facebook started targeting him with ads based on comments he made in posts that he liked chocolate. He said he thought conversations he was having with family and friends on their personal pages were private.
“I’m communicating with my friends on Facebook and indicate that I love a certain kind of chocolate,” Nelson told Zuckerberg. “And all of a sudden I start receiving advertisements for chocolate. What if I don’t want to receive those commercial advertisements?”
Zuckerberg didn’t respond directly to Nelson’s allegation about Facebook tracking his posts.
But he explained that members can use a Facebook feature called “Privacy Checkup” to limit ads. He made it clear that users can’t completely block Facebook-generated advertisements — that would be counter-productive to Facebook’s profitability.
Zuckerberg said Facebook doesn’t have a business model where people can sign up and use Facebook for free and decline to receive ads.
“We don’t offer an option today for people to pay to not show ads,” Zuckerberg said. “We think offering an ad-supported service is the most aligned with our mission of trying to help connect everyone in the world, because we want to offer a free service that everyone can afford.”
He said users can only delete certain “interests” in ad preferences in the privacy settings. He added that Nelson or anyone else also can go into Facebook’s AdChoices and “turn off third-party information,” which allows other ad or marketing companies to track users.
Seth Myers, digital director of Standard Wonder group, an ad agency in Detroit, said he wasn’t surprised Nelson claimed his post liking chocolate was tracked by Facebook. He said it is an Internet myth that Google or Facebook mine member posts or social conversations for advertisers to direct content.
“It doesn’t work like that,” Myers said. “Facebook or Google don’t mine what people say in posts.”
In an interview with Facebook to clarify what Nelson had alleged, a company spokesman, who asked not to be named, told Crain’s that Facebook does not allow targeting based on people’s personal attributes, which includes their physical or mental health.
“We also do not enable ad targeting based on people’s written posts, group memberships or other activity on Facebook outside of liking a page or clicking on an ad,” she said.
Despite what Nelson suggested, Myers said Facebook and Google are careful in how much information they share with advertisers on members.
“There is a trail of breadcrumbs,” or Facebook Pixels, that Facebook uses to track people when they are on the website, said Myers, adding that the senator could have visited a chocolate website or “Liked” something chocolate to receive the targeted ads.
“Facebook doesn’t sell companies lists of 1,000 people in Detroit who have a medical ailment” based on their keywords, Myers said. “I could ask Facebook that I would like to reach 1,000 people who fit the following criteria … age group, sex, geography, income level, interest. ….But I am not buying (names and emails).”
Facebook regularly places ads in front of members based on personal preferences they use when the sign up for the service without needing someone’s email address.
For example, Facbook may include ads based on a members’ social actions, such as liking the page that is running the ads. However, Facebook also allows members to limit who can see this information to “only friends” or “no one.”
How Facebook gets paid? Companies only pay Facebook when someone clicks on their ad. Once someone indicates a preference, the ad is guaranteed when the person next opens Facebook.
“Say the last two weeks you visited a hospital website to do research on a condition,” Myers said. “There are tracking pixels on the hospital website. If the hospital advertises with Facebook, the next time you go on Facebook, that hospital pixel is picked up and Facebook can present an ad for you to see.”
While Facebook denies the company tracks conversations between members or posts, Facebook provides members’ browsing history and other website data to target ads on behalf of advertisers.
Google uses a complex bidding process to sell its popup and display ads. Like Facebook, Google’s advertising services also don’t use IP addresses to track visitors, but they do use a visitor’s current IP address to direct ads to them based on specific geographic areas.
For example, if you do a search on “prostate check near me,” some of the results you get will be determined by Google’s search engine algorithms as the most useful links, and some will be paid ads, and marked as such.
Myers said one reason companies like digital is because the ad visit data can be counted, making return on investment easier to track and compare with actual sales, patient visits or admissions.
Here is another scenario: A hospital, physician, pharmacy or health insurer places an advertisement on a website. A prospective patient sees the ad and clicks on it for more information and might even provide an email address to get a discount.
“For the next several days, you would get an email about (the service),” Myers said. “You go a week without purchasing (or visiting the office or hospital) and you get another email.”
Or, if you spend 10 minutes on a website, click on an article, then come back the next day and spend another 10 minutes, click on a similar article, Google knows and will direct a custom ad to you.
Still, Google and Facebook have many ways to sell ads without crossing a certain privacy line, Myers said, even though that line might seem blurry for users.
One way to find out why you are receiving a certain ad is to look for a sponsored ad and click on the right hand corner and select “Why am I seeing this ad?”
For example, on an ad for Vacasa Rentals, Facebook might tell you: “Vacasa added you to a list of people they want to reach on Facebook. … This is information based on your Facebook profile and where you’ve connected to the Internet.”
Myers said Facebook plans to make it more difficult for advertisers to target potential customers. “They are limiting the ability to target third party data and are pushing advertisers to do a better job in how they target people,” he said.
In late May, Facebook announced changes in its issues ad policy to increase transparency for its electoral and issues ads. This is intended to address the problem Facebook and other social sites has acknowledged regarding “fake news.”
Advertisers placing political ads are now required to verify their identity and location. Once approved, ads will appear with a label in the news feed, disclosing who paid for the ad from the advertiser.
Last fall, Facebook published its commercial ad principles that promises more transparency over advertisements, including a feature that lets members hide or block ads.
But the New York attorney general’s office is continuing its investigation into Facebook over the use of Facebook user data by Cambridge Analytica and others. The FTC also investigating whether Facebook violated a 2011 settlement agreement that promised the company would obtain members’ express consent before sharing their information with third parties.
“The news that Facebook struck ‘data-sharing’ partnerships with other corporations is yet another reminder of the many questions that remain unanswered,” said AG Barbara Underwood said in a statement Monday. “Consumers have the right to know how their personal information is being used; and the companies we trust with our information have a critical responsibility to protect it.”
Like pretty much everything in the world, Facebook, Google, Twitter, Instagram and LinkedIn actually aren’t free after all.
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by JAY GREENE
source: Crain’s Detroit