Facebook is trying to capitalize its huge online audience by offering advertisers new ways of reaching people who use Facebook, as the company tries to prove the value of its advertising model to the market and investors.
Starting with Facebook Exchange (FBX), it is a feature which gives marketers an opportunity to bid on showing ads in real time. Facebook said it worked with approved third-party service providers and marketers to enable this process. Here is how it works: Facebook agrees with a provider on an ID number (separate from a user's Facebook ID) for each visitor's browser. If someone then visits Facebook and his or her browser has that ID, Facebook notifies the service provider, who tells the social network when a marketer wants to show a particular ad. This allows marketers to show users ads relevant to their existing relationship with them.
FBX ads on Facebook include an "X" link that lets users provide feedback about ads. Facebook also provides a link that lets users learn more about and choose to opt out of future ads from the service provider responsible for that ad.
Another new feature allows marketers to reach people on Facebook using information they already have. For example, a shoe store might want to show a special offer to people who have already bought shoes from them. The store can provide Facebook with "hashes" of their customers' email addresses so that Facebook can show those same people the ad without the store having to send the company 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. Since Facebook and the store use the same method to create each hash, Faebook can compare the store's hashes to hashes of addresses in its records and show the ad to any group of users that match. If a hash from the store does not match any of Facebook's, the company says it discards it without discovering the corresponding email address and without storing any information that it did not have before.
Finally, Facebook recently partnered with Datalogix to offer marketers a way to measure how their ads on Facebook drive sales for their products in stores.
Datalogix has bought data from around 70 million US households, primarily drawn from loyalty cards at more than 1,000 retailers.
By matching information gathered from these cards against emails or other information used to establish Facebook accounts, Datalogix claims it can track whether people purchased a product after viewing an ad on Facebook.
The emails and other information are made anonymous and collected into groups of people who either saw and ad or those whose didn't see an ad.
Facebook says it has designed this process with privacy at the forefront. The cpompany compares hashes of some Facebook data with hashes provided to us by Datalogix. Once they are compared, Facebook is able to send corresponding data on the reach of large-scale ad campaigns, which Datalogix uses to create aggregate reports comparing product purchases by large groups of people who did or did not see an ad.
Facebook says it remains committed to privacy, so the company had an auditing firm evaluate the privacy implications of this process. According to Facebook, the auditor confirmed that, throughout this process, Datalogix is not allowed to learn more about users from Facebook profile information. Similarly, Datalogix does not send Facebook any of their purchase data. Datalogix only sends the marketer aggregate information about large groups of people and none of this data is attributable to an individual Facebook user, Facebook added.