Facebook targets ads based on actual user purchases

Facebook has launched a program that will target advertisements based on what users have actually purchased, but said that advertisers will not have direct access to information that identifies the user.

"To date, advertisers have been able to show ads to people based on their expressed interests on Facebook," the company said on Wednesday in a blog post. With the introduction of new "partner categories," advertisers can also show ads to users on Facebook "based on the products and brands they buy across both desktop and mobile".

The partner categories at launch include 500 distinct groups, ranging from people who are heavy buyers of children's cereals to people who are likely to buy an entry, economy or compact vehicle in the next 180 days. The categories can be fine-tuned to, for example, let a local car dealership show ads to people living near their dealership who are likely in the market for a new car.

Partner categories use data from third parties including Acxiom, Datalogix and Epsilon. These companies collect data from a large number of user purchases both online and offline. Datalogix, for example, claims to have data on almost every US. household and more than US$1 trillion in consumer transactions.

No personal information is shared between Facebook, third parties or advertisers, Facebook said. "Partner categories work the same way all targeting on Facebook works. The advertiser only knows the size of the audience and can't access any information about individuals included in a category," Facebook added.

The company's revenue from advertising was US$1.33 billion in the fourth quarter of last year, which was 84 per cent of total revenue for the quarter, and a 41 per cent increase from the same quarter in the previous year. The company has been trying to offer new services to advertisers, including recently testing targeted advertisements on users' News Feeds on Facebook, based on their browsing history.

Facebook, which has been frequently under scrutiny for possible invasion of user privacy, emphasised in a separate post that the privacy of users would not be compromised by the new partner categories program. It said it set up the program "in a way that people who use Facebook can understand how this advertising works and have the ability to control it."

When he sees a Facebook advertisement, a user can click on "About this Ad" from a drop-down menu, and identify the company responsible for including him in the audience for the ad. The user can also choose to opt-out from the ad or any ads from the Facebook partner. Partners have also agreed to provide on the "About this Ad" page a comprehensive opt-out of future targeting by that company, not only on one website, but across the Web, Facebook said.

Follow CMO on Twitter: @CMOAustralia or take part in the CMO Australia conversion on LinkedIn: CMO Australia.