New Facebook Advertising Features Return Privacy to Forefront

Oct. 3, 2012 — -- It's been the age-old issue when it comes to Facebook's profits: Your personal information lives on the site and the company makes money off by placing ads based on that information. Yes, it's long been known: Facebook makes money off of you.

But a report in the Wall Street Journal has raised new privacy concerns, suggesting the social network is going even farther to provide users' personal information to its advertisers. According to the newspaper report, Facebook is "selling access to its users" by allowing advertisers to target ads based on users' email addresses and phone numbers.

Facebook recently announced its Facebook Exchange and Custom Audiences efforts. Facebook Exchange lets advertisers bid in real-time so ads are delivered more quickly and are more relevant to Facebook's 900 million users.

Custom Audiences has bigger personal information implications. The feature lets advertisers target their ad or sponsored story to a specific set of users with whom they already have relationships. That means if they have a user's email address or phone number through other means, they can cross-reference that with what is listed on Facebook and then target that user on Facebook.

"This means that in addition to targeting the types of people you want to reach among the Facebook population, you can now also reach segments of specific people based on information you have about your own, offline audiences," Facebook explains on its own site.

In the wake of Facebook's "disappointing" IPO (Mark Zuckerberg's adjective, not ours) Facebook has been under pressure to improve its advertising efforts. Advertisers have complained since the IPO that they don't know who they are reaching with their ads. When the company first sold stock on May 18, it offered a price of $38 per share, but the stock quickly fell about 50 percent. Yesterday, the stock closed at $22.27.

On Tuesday Sheryl Sandberg, the COO of Facebook, defended Facebook's choices to push advertising on the site and use more members' data to tailor ads to them.

Charlie Rose asked Sandberg at an Advertising Week event in New York City: "You are selling user information, correct?"

Sandberg firmly responded: "Absolutely not true. We won't sell it to you, we won't sell it to anyone, we won't sell it to Marc [Andreesen], and he is on our board."

Sandberg went on to say, "We never sell user information, we don't make more money when you share more, and we do not give your information to marketers. We do have systems that enable marketers to serve the right ad to people at the right time."

In 2011, the Federal Trade Commission and Facebook settled on a number of privacy disputes, including one that resulted in private user information being revealed on the site.

At the time, Facebook agreed to regular privacy audits and Mark Zuckerberg pledged to users that it would better inform the public of its privacy practices and policies.

While Zuckerberg has been off in Russia this week, Sandberg stepped in and reemphasized the same points yesterday. "Every new technology brings fears…. Trust is the cornerstone of our business. People will only use Facebook if they trust us."