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Facebook looks to cash in on user data

Profiles, status updates and messages all include a mother lode of voluntarily provided information. The social media site is using it to help advertisers find exactly who they want to reach. Privacy watchdogs are aghast.

April 17, 2011|By Jessica Guynn | Los Angeles Times Staff Writer

Reporting from Palo Alto — Julee Morrison has been obsessed with Bon Jovi since she was a teenager.

So when paid ads for fan sites started popping up on the 41-year-old Salt Lake City blogger's Facebook page, she was thrilled. She described herself as a "clicking fool," perusing videos and photos of the New Jersey rockers.

Then it dawned on Morrison why all those Bon Jovi ads appeared every time she logged on to the social networking site.

"Facebook is reading my profile, my interests, the people and pages I am 'friends' with, and targeting me," Morrison said. "It's brilliant social media but it's absolutely creepy."

For Facebook users, the free ride is over.

For years, the privately held company founded by Mark Zuckerberg in a Harvard dorm room put little effort into ad sales, focusing instead on making its service irresistible to users. It worked. Today more than 600 million people have Facebook accounts. The average user spends seven hours a month posting photos, chatting with friends, swapping news links and sending birthday greetings to classmates.

Now the Palo Alto company is looking to cash in on this mother lode of personal information by helping advertisers pinpoint exactly whom they want to reach. This is no idle boast. Facebook doesn't have to guess who its users are or what they like. Facebook knows, because members volunteer this information freely — and frequently — in their profiles, status updates, wall posts, messages and "likes."

It's now tracking this activity, shooting online ads to users based on their demographics, interests, even what they say to friends on the site — sometimes within minutes of them typing a key word or phrase.

For example, women who have changed their relationship status to "engaged" on their Facebook profiles shouldn't be surprised to see ads from local wedding planners and caterers pop up when they log in. Hedgehog lovers who type that word in a post might see an ad for a plush toy version of the spiny critters from Squishable.com. Middle-aged men who list motorcycling as one of their hobbies could get pitches from Victory Motorcycles. If a Facebook user becomes a fan of 1-800-FLOWERS, her friends might receive ads telling them that she likes the floral delivery service.

Marketers have been tracking consumers' online habits for years, compiling detailed dossiers of where they click and roam. But Facebook's unique trove of consumer behavior could transform it into one of the most powerful marketing tools ever invented, some analysts believe. And that could translate into a financial bonanza for investors in the 7-year-old company as it prepares for a public offering, perhaps as soon as next year.

But privacy watchdogs say Facebook's unique ability to mine data and sell advertising based on what its members voluntarily share amounts to electronic eavesdropping on personal updates, posts and messages that many users intended to share only with friends.

"Facebook has perfected a stealth digital surveillance apparatus that tracks, analyzes and then acts on your information, including what you tell your friends," said Jeffrey Chester, executive director of the Center for Digital Democracy. "Facebook users should be cautious about whether the social networking giant ultimately has their best interests at heart."

Bon Jovi fan Morrison has removed some information from her profile to make it more difficult for advertisers to target her. "I thought, 'Wait a minute, I didn't give you permission to look into my life,'" she said.

Facebook says it does not disclose information that would allow advertisers to identify individual users, but filters them based on geography, age or specific interests. It also lets users control whether companies such as 1-800-FLOWERS can display the users' names to others to promote products. But any information users post on the site — hobbies, status updates, wall posts — is fair game for ad targeting.

Facebook's first experiment with paid ads was a flop. In 2007 it rolled out Beacon, which broadcast information on Facebook about users' activities and purchases elsewhere on the Web without their permission. Facebook pulled the program after settling a lawsuit brought on behalf of Facebook users.

This time around, company officials appear to be proceeding more cautiously. David Fischer, Facebook's vice president of advertising and global operations, says Facebook delivers ads that are relevant to users' lives.

"This is an opportunity for brands to connect with you," Fischer said. "When someone likes a brand, they are building a two-way conversation, creating an ongoing relationship."

A lot is riding on getting it right. Last year, online advertising in the U.S. grew 15% to $26 billion, according to the Internet Advertising Bureau.

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