Facebook has long allowed advertisers to target potential customers and employees based on their demographics and interests, as revealed by the vast wealth of data the platform collects.
Now the social media giant is moving away from that approach for some advertisers, amid mounting evidence that its micro-targeting techniques have been abused.
While these techniques have helped propel Facebook into one of the world’s most successful ad businesses — with 99% of its $55.8 billion in revenue last year coming from ads — the settlement is unlikely. Tuesday deals a blow to the company’s results.
But that could make the platform less attractive to some advertisers. Many companies use Facebook to recruit workers and promote credit cards.
“It may not affect Facebook much, but it will hurt small advertisers who need this narrow targeting to sell products,” said Laura Martin, senior internet analyst at investment bank Needham & Co., in an interview. “If businesses can’t reach their micro-targeted demographic, they’re going to walk away from advertising on Facebook. All ad prices could drop if advertiser demand drops.
The change comes at a time when Facebook and other social media platforms are coming under increasing scrutiny from regulators, lawmakers and the public. The company is under investigation by the Federal Trade Commission, the Securities and Exchange Commission and several state attorneys general regarding the Cambridge Analytica data privacy controversy.
Civil rights advocates have warned for years that Facebook’s ads violate anti-discrimination laws because advertisers can use data to exclude African Americans, women, seniors, people with disabilities and others.
The Ministry of Justice authorized a trial to proceed last year over Facebook’s objections, arguing that the company can be held liable for ad targeting tools that deprive people of housing offers.
So far, the company has made only minimal changes to its systems and has largely resisted calls for change, saying its practices are standard in online advertising.
Tuesday’s announcement will require a major overhaul of Facebook’s software. Facebook said it would make the changes by the end of the year, creating a separate portal to limit the amount of housing, jobs and credit advertisers that can micro-target their audience.
“We are taking every step we can to protect people from discrimination on our platform,” Sheryl Sandberg, Facebook’s chief operating officer, said in an interview. “We believe that this settlement is not only going to [the letter of] the law but beyond the law by taking very, very strong measures to ensure that no discrimination occurs.
Sandberg declined to say whether Facebook’s advertising practices were illegal.
The news is expected to ripple through the tech industry. Google, Twitter, and Amazon all offer similar demographic targeting tools, and companies such as LinkedIn have vibrant jobs recruiting businesses.
“Presumably every platform will now abide by the same terms of this settlement or risk being sued,” Martin said.
Settlements resolve lawsuits and other legal challenges filed during the last years by the National Fair Housing Alliance, the American Civil Liberties Union, the Communications Workers of America and others.
“This type of discrimination that we thought was eradicated in the 1960s and 70s by our civil rights laws should not be given new life in the digital age,” said Galen Sherwin, senior attorney at the ACLU. “This regulation establishes that the Web is not a civil rights-free zone.”
Company pays less than $5 million to parties, including $2.5 million settlement with NFHA to train advertisers on how to comply with housing and lending laws, and advertising credits to promote fair housing.
“It’s going to be very far-reaching,” said Lisa Rice, president and CEO of the NFHA. “Technology and how data is used is really the new frontier of civil rights.”
Federal Housing Act prohibits discrimination based on race, color, religion, national origin, sex, disability or marital status. Facebook said the new platform will also prevent advertisers from discriminating based on sexual orientation, age, ethnicity and other characteristics covered by state and local civil rights laws.
the NFHA and other housing groups for follow-up Facebook last March, alleging that the company created pre-filled menus for advertisers this made it easy to prevent people with disabilities or families with children from seeing rental or sale ads.
Facebook categorized people based on their demographics, behaviors and interests using terms such as “English as a second language”, “disabled parking permit” or “Telemundo” – which critics say , are proxies for protected person categories.
Fair housing groups say online businesses such as Facebook have replaced bulletin boards, “rental boards” and “classified ads” to become the hubs where people search for homes and jobs. Facebook “abused its enormous power,” according to the lawsuit.
Housing groups conducted surveys in Miami, New York, San Antonio and the district to gather evidence for their lawsuit, creating dozens of listings that excluded families with children, women, disabled and Afro -Americans, Hispanics and people of certain national origins – all without consumers ever knowing they had been excluded.
The ACLU and other groups filed a legal complaint in September with the Federal Equal Employment Opportunity Commission, accusing Facebook of allowing discriminatory job postings with its advertising targeting tools. Some companies only targeted people under the age of 45.
Legal efforts followed a 2016 ProPublica Survey which revealed that Facebook allowed advertisers to exclude African Americans, Latinos and Asian Americans. While Facebook later said it would ban housing, job and credit ads that discriminate based on “ethnic affinity“he continued to allow other forms of discriminatory targeting, including on the basis of gender and disability, civil rights groups alleged.
The company signed a legally binding commitment in July promising that it would no longer allow advertisers to discriminate, as part of a settlement with the Washington State Attorney General. As part of the pledge, Facebook removed thousands of additional targeting categories.
Tuesday’s announcement goes much further. The new advertising platform will introduce technological barriers to prevent some companies from significantly restricting their target audience.
Advertisers will still be able to target by location, with a minimum geographic radius of 15 miles.
Previously, Facebook relied heavily on advertisers to comply with its anti-discrimination policies, but did not actively prevent them from using targeting categories.
“Our policies already prohibit advertisers from using our tools to discriminate,” Sandberg wrote in a blog post Tuesday. “We removed thousands of categories from targeting related to protected classes such as race, ethnicity, sexual orientation and religion. But we can do better.”
Facebook said it will also try to detect advertisers who attempt to use prohibited terms and redirect them to the new limited portal.
But some analysts say Facebook’s new advertising platform, like other enforcement systems the company has introduced, could be easily manipulated.
“People will either have to identify themselves as a real estate broker, landlord or employer, or Facebook will have to identify them. Both options are going to be difficult to exploit in practicesaid Dennis Yu, managing director of BlitzMetrics, a digital marketing company that focuses on Facebook ads. “There are many ways to circumvent the system.”
He pointed out that Facebook’s recently implemented system for identifying political ads has left many advertisers falling through the cracks.
Facebook has also committed to make its advertising more transparent by the end of the year. As part of the settlement, it provides for give users the ability to search all housing-related listings – for rentals, sales, financing, appraisals and insurance – that appear on the platform whether or not users received the ads in their individual news feeds.
The company has a similar system for political ads, which are visible to any Facebook user, even if they are not part of the network of friends of the person who posted them. The system was created in response to findings that Russian operatives and others abused Facebook by creating hyper-targeted political ads.
Anthony Romero, executive director of the ACLU, said Tuesday that he hoped Facebook’s “first-of-its-kind” settlement would be a “resource for other platforms in the future.”
Facebook is still working to address a separate complaint from the Department of Housing and Urban Development, which accused the company from enabling unlawful housing discrimination by allowing advertisers to exclude people based on their race, gender, zip code or religion.
Sandberg declined to say how much the ad changes are expected to cost the company.
“We care more about protecting people from discrimination than about lost revenue or costs incurred,” she said, adding that the company will use technology as well as humans to review ads placed on the new platform.
Kieley Taylor, global head of social media for GroupM, a major ad-buying conglomerate whose financial clients frequently use Facebook to target credit card ads, said companies are watching closely to determine whether advertising on Facebook would become less valuable to them.
Loss of data could lead to a “significant decrease in efficiency”, she said. “We ask teams to keep a close eye on performance.”