Facebook on Tuesday agreed to overhaul its lucrative targeted advertising system to settle accusations that landlords, lenders and employers use the platform to discriminate — a significant shift for a company that built a business empire on selling personal data.
The settlement compels Facebook to withhold a wide array of detailed demographic information — including gender, age and ZIP codes, which often are used as indicators of race — from advertisers when they market housing, credit and job opportunities.
Facebook long has allowed advertisers to target potential customers and employees based on their demographics and interests, as gleaned from the vast trove of data the platform collects.
Now, the social media giant is stepping away from that approach for certain advertisers, amid mounting evidence that its micro-targeting techniques were abused.
Although those techniques helped propel Facebook into one of the world’s most successful advertising businesses — with 99 percent of its $55.8 billion in revenue last year deriving from ads — Tuesday’s settlement is unlikely to deal a major blow to the company’s bottom line.
But it could make the platform less valuable to certain advertisers. Many companies use Facebook to recruit workers and promote credit cards.
“It may not affect Facebook very much, but it will hurt small advertisers who require that narrow targeting to sell products,” said Laura Martin, a senior internet analyst at the investment bank Needham and Co.
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“If companies can’t reach their micro-targeted demographic, they are going to walk away from advertising on Facebook. All ad pricing could go down if demand by advertisers fall.”
The change arrives at a moment when Facebook and other social media platforms face growing scrutiny from regulators, lawmakers and the public. The company is being investigated by the Federal Trade Commission, the Securities and Exchange Commission and several state attorneys general over the Cambridge Analytica data privacy controversy.
Civil rights advocates have warned for years that Facebook’s ads violated anti-discrimination laws because advertisers were able to use the data to exclude blacks, women, seniors, people with disabilities and others.