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Amongst massive criticism over data privacy, Facebook showed the resiliency of its advertising machine by beating Wall Street’s $11.41 billion revenue estimate in its Q1 2018 earnings report by raking in $11.97 billion in revenue with $1.69 EPS compared to the $1.35 estimate.
Facebook added 48 million daily active users to hit 1.449 billion, up 3.42 percent to revive Facebook’s growth after slower 2.18 percent growth last quarter. But Facebook only added 70 million monthly active users to reach 2.196 billion, a 3.14 percent growth rate that was a little slower than last quarter’s 3.39 percent growth. Both daily and monthly users are up 13 percent year-over-year, showing Facebook’s troubles haven’t paralyzed its growth.
This was perhaps the most tumultuous quarter since Facebook went public. Facebook faced intense criticism regarding the Cambridge Analytica scandal and its data privacy practices, leading a massive pull-back of developer capabilities as Zuckerberg headed to testify before Congress. Last quarter saw Facebook’s first-ever decline in users in a market, with a 700,000 user drop in the U.S. & Canada market following changes to promote well-being that reduced the prevalence of viral videos.

Facebook was able to revive its U.S. & Canada user growth this quarter, perking back up to 185 million, from 184 million last quarter — though that’s just a return to where it was in Q3 2017. Monthly active user count in the market went from 239 to 241 million. That shows that while people might disagree with Facebook’s approach to privacy, they aren’t about to give up their News Feeds.
Demonstrating Facebook’s declining web presence, mobile made up $10.7 billion, or 91 percent of all ad revenue, up from 89 percent last quarter. Facebook reached $4.98 billion in profit, up from a weak $4.26 billion last quarter. Average Revenue Per User reached $5.53, up 30 percent year-over-year thanks to strong gains this quarter in Europe and Asia-Pacific. Facebook’s headcount has swelled 48 percent year-over-year as it’s now half-way to its promise of doubling its security and content moderation staff from 10,000 to 20,000 in 2018.

The recent scandals have put a lot of downward pressure on its share price, but apparently the company thinks it’s a good buy. It’s increased the amount authorized under a share repurchase program by an additional $9 billion, on top of an original $6 billion plan, of which it’s spent $4 billion. It’s partly to offset big stock distributions for employees, but CFO David Wehner also said it was “opportunistic,” aka related to Facebook perceiving its price as too low. Wall Street apparently liked the earnings report as shares are up over 4.38 percent to $166.68 in after-hours trading.
The question is whether the new ads transparency requirements, developer platform crackdown and Facebook’s quest to make using it healthier will show up in next quarter’s earnings. These changes could deter advertisers, give users less functionality to play with and remove low-quality viral content that might make users feel bad but keeps them scrolling.
CEO Mark Zuckerberg wrote that, “Despite facing important challenges, our community and business are off to a strong start in 2018. We are taking a broader view of our responsibility and investing to make sure our services are used for good. But we also need to keep building new tools to help people connect, strengthen our communities, and bring the world closer together.” We’ll get to hear more from him at 2pm Pacific during the earnings call, so stay tuned here.
Updates from the earnings call:
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Facebook is about to start pushing European users to speed through giving consent for its new GDPR privacy law compliance changes. It will ask people to review how Facebook applies data from the web to target them with ads, and surface the sensitive profile info they share. Facebook will also allow European and Canadian users to turn on facial recognition after six years of the feature being blocked there. But with a design that encourages rapidly hitting the “Agree” button, a lack of granular controls, a laughably cheatable parental consent request for teens and an aesthetic overhaul of Download Your Information that doesn’t make it any easier to switch social networks, Facebook shows it’s still hungry for your data.
The new privacy change and terms of service consent flow will appear starting this week to European users, though they’ll be able to dismiss it for now — although the May 25th GDPR compliance deadline Facebook vowed to uphold in Europe is looming. Meanwhile, Facebook says it will roll out the changes and consent flow globally over the coming weeks and months with some slight regional differences. And finally, all teens worldwide that share sensitive info will have to go through the weak new parental consent flow.

Facebook brought a group of reporters to the new Building 23 at its Menlo Park headquarters to preview the changes today. But feedback was heavily critical as journalists grilled Facebook’s deputy chief privacy officer Rob Sherman. Questions centered around how Facebook makes accepting the updates much easier than reviewing or changing them, but Sherman stuck to talking points about how important it was to give users choice and information.
“Trust is really important and it’s clear that we have a lot of work to do to regain the trust of people on our service” he said, giving us deja vu about Mark Zuckerberg’s testimonies before congress. “We know that people won’t be comfortable using Facebook if they don’t feel that their information is protected.”
There are a ton of small changes, so we’ll lay out each with our criticisms.
Facebook’s consent flow starts well enough with the screen above offering a solid overview of why it’s making changes for GDPR and what you’ll be reviewing. But with just an “X” up top to back out, it’s already training users to speed through by hitting that big blue button at the bottom.
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First up is control of your sensitive profile information, specifically your sexual preference, religious views and political views. As you’ll see at each step, you can hit the pretty blue “Accept And Continue” button regardless of whether you’ve scrolled through the information. If you hit the ugly grey “Manage Data Setting” button, you have to go through an interstitial where Facebook makes its argument trying to deter you from removing the info before letting you make and save your choice. It feels obviously designed to get users to breeze through it by offering no resistance to continue, but friction if you want to make changes.
Facebook doesn’t let advertisers target you based on this sensitive info, which is good. The only exception is that in the U.S., political views alongside political Pages and Events you interact with impact your overarching personality categories that can be targeted with ads. You can opt out of being targeted by those too. But your only option here is either to remove any info you’ve shared in these categories so friends can’t see it, or allow Facebook to use it to personalize the site. There’s no option to keep this stuff on your profile but not let Facebook use it.

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Facebook is bringing facial recognition back to Europe and Canada. The Irish Data Protection commissioner who oversees the EU banned it there in 2012. Users in these countries will get a chance to turn it on, which is the default if they speed through. It’s a useful feature that can make sure people know about the photos of them floating around. But here the lack of granularity is concerning. Users might want to see warnings about possible impersonators using their face in their profile pics, but not be suggested as someone to tag in their friends’ photos. Unfortunately, it’s all or nothing. While Facebook is right to make it simple to turn on or off completely, granular controls that unfold for those that want them would be much more empowering.
[Update: This article has been updated to reflect that Facebook indeed can offer facial recognition in Europe and Canada.]
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A major concern that’s arisen in the wake of Zuckerberg’s testimonies is how Facebook uses data collected about you from around the web to target users with ads and optimize its service. While Sherman echoed Zuckerberg in saying that users tell the company they prefer relevant ads, and that this data can help thwart hackers and scrapers, many users are unsettled by the offsite collection practices. Here, Facebook lets you block it from targeting you with ads based on data about your browsing behavior on sites that show its Like and share buttons, conversion Pixel or Audience Network ads. The issue is that there’s no way to stop Facebook from using that data from personalizing your News Feed or optimizing other parts of its service.

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Facebook recently rewrote its terms of service and data use policy to be more explicit and easy to read. It didn’t make any significant changes other than noting the policy now applies to its subsidiaries like Instagram and Messenger. [Correction: But WhatsApp and Oculus have their own data policies.] That’s all clearly explained here, which is nice.
But the fact that the button to reject the new Terms of Service isn’t even a button, it’s a tiny “see your options” hyperlink, shows how badly Facebook wants to avoid you closing your account. When Facebook’s product designer for the GDPR flow was asked if she thought this hyperlink was the best way to present the alternative to the big “I Accept” button, she disingenuously said yes, eliciting scoffs from the room of reporters. It seems obvious that Facebook is trying to minimize the visibility of the path to account deletion rather than making it an obvious course of action if you don’t agree to its terms.

I requested Facebook actually show us what was on the other side of that tiny “see your options” link and this is what we got. First, Facebook doesn’t mention its temporary deactivation option, just the scary permanent delete option. Facebook recommends downloading your data before deleting your account, which you should. But the fact that you’ll have to wait (often a few hours) before you can download your data could push users to delay deletion and perhaps never resume. And only if you keep scrolling do you get to another tiny “I’m ready to delete my account” hyperlink instead of a real button.

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GDPR also implements new regulations about how teens are treated, specifically users between the ages of 13 (the minimum age required to sign up for Facebook) and 15. If users in this age range have shared their religious views, political views or sexual preference, Facebook requires them to either remove it or get parental consent to keep it. They also need permission to be targeted with ads based on data from Facebook’s partners. Without that permission, they’ll see a less personalized version of Facebook. But the system for attaining and verifying that parental consent is a joke.
Users merely select one of their Facebook friends or enter an email address, and that person is asked to give consent for their “child” to share sensitive info. But Facebook blindly trusts that they’ve actually selected their parent or guardian, even though it has a feature for users to designate who their family is, and the kid could put anyone in the email field, including an alternate address they control. Sherman says Facebook is “not seeking to collect additional information” to verify parental consent, so it seems Facebook is happy to let teens easily bypass the checkup.

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To keep all users abreast of their privacy settings, Facebook has redesigned its Privacy Shortcuts in a colorful format that sticks out from the rest of the site. No complaints here.
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Facebook has completely redesigned its Download Your Information tool after keeping it basically the same for the past eight years. You can now view your content and data in different categories without downloading it, which alongside the new privacy shortcuts is perhaps the only unequivocally positive and unproblematic change amidst today’s announcements.

And Facebook now lets you select certain categories of data, date ranges, JSON or HTML format and image quality to download. That could make it quicker and easier if you just need a copy of a certain type of content but don’t need to export all your photos and videos, for example. Thankfully, Facebook says you’ll now be able to download your media in a higher resolution than the old tool allowed.
But the big problem here was the subject of my feature piece this week about Facebook’s lack of data portability. The Download Your Information tool is supposed to let you take your data and go to a different social network. But it only exports your social graph, aka your friends, as a text list of names. There are no links, usernames or other unique identifiers unless friends opt into let you export their email or phone number (only 4 percent of my friends do), so good luck finding the right John Smith on another app. The new version of Download Your Information exports the same old list of names, rather than offering any interoperable format that would let you find your friends elsewhere.

Overall, it seems like Facebook is complying with the letter of GDPR law, but with questionable spirit. Sure, privacy is boring to a lot of people. Too little info and they feel confused and scared. Too many choices and screens and they feel overwhelmed and annoyed. Facebook struck the right balance in some places here. But the subtly pushy designs seem intended to steer people away from changing their defaults in ways that could hamper Facebook’s mission and business.
Making the choices equal in visible weight, rather than burying the ways to make changes in grayed-out buttons and tiny links, would have been more fair. And it would have shown that Facebook has faith in the value it provides, such that users would stick around and leave features enabled if they truly wanted to.
When questioned about this, Sherman pointed the finger at other tech companies, saying he thought Facebook was more upfront with users. Asked to clarify if he thought Facebook’s approach was “better,” he said “I think that’s right.” But Facebook isn’t being judged by the industry standard, because it’s not a standard company. It’s built its purpose and its business on top of our private data, and touted itself as a boon to the world. But when asked to clear a higher bar for privacy, Facebook delved into design tricks to keep from losing our data.
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Would being asked to pay Facebook to remove ads make you appreciate their value or resent them even more? As Facebook considers offering an ad-free subscription option, there are deeper questions than how much money it could earn. Facebook has the opportunity to let us decide how we compensate it for social networking. But choice doesn’t always make people happy.
In February I explored the idea of how Facebook could disarm data privacy backlash and boost well-being by letting us pay a monthly subscription fee instead of selling our attention to advertisers. The big takeaways were:
However, my analysis neglected some of the psychological fallout of telling people they only get to ditch ads if they can afford it, the loss of ubiquitous reach for advertisers, and the reality of which users would cough up the cash. Though on the other hand, I also neglected the epiphany a price tag could produce for users angry about targeted advertising.
This conversation is relevant because Zuckerberg was asked twice by congress about Facebook potentially offering subscriptions. Zuckerberg endorsed the merits of ad-supported apps, but never ruled out letting users buy a premium version. “We don’t offer an option today for people to pay to not show ads” Zuckerberg said, later elaborating that “Overall, I think that the ads experience is going to be the best one. I think in general, people like not having to pay for a service. A lot of people can’t afford to pay for a service around the world, and this aligns with our mission the best.”
But that word ‘today’ gave a glimmer of hope that we might be able to pay in the future.
Facebook CEO and founder Mark Zuckerberg testifies during a US House Committee on Energy and Commerce hearing about Facebook on Capitol Hill in Washington, DC, April 11, 2018. (Photo: SAUL LOEB/AFP/Getty Images)
What would we be paying for beyond removing ads, though?. Facebook already lets users concerned about their privacy opt out of some ad targeting, just not seeing ads as a whole. Zuckerberg’s stumping for free Internet services make it seem unlikely that Facebook would build valuable features and reserve them for subscribers
Spotify only lets paid users play any song they want on-demand, while ad-supported users are stuck on shuffle. LinkedIn only lets paid users message anyone they want and appear as a ‘featured applicant’ to hirers, while ad-supported users can only message their connections. Netflix only lets paid users…use it at all.
But Facebook views social networking as a human right, and would likely want to give all users any extra features it developed like News Feed filters to weed out politics or baby pics. Facebook also probably wouldn’t sell features that break privacy like how LinkedIn subscribers can see who visited their profiles. In fact, I wouldn’t bet on Facebook offering any significant premium-only features beyond removing ads. That could make it a tough sell.
Meanwhile, advertisers trying to reach every member of a demographic might not want a way for people to pay to opt-out of ads. If they’re trying to promote a new movie, a restaurant chain, or an election campaign, they’d want as strong of penetration amongst their target audience as they can get. A subscription model punches holes in the ubiquity of Facebook ads that drive businesses to the app.
But the biggest issue is that Facebook is just really good at monetizing with ads. For never charging users, it earns a ton of money. $40 billion in 2017. Convincing people to pay more with their wallets than their eyeballs may be difficult. And the ones who want to pay are probably worth much more than the average.

Let’s look at the US & Canada market where Facebook earns the most per user because they’re wealthier and have more disposable income than people in other parts of the world, and therefore command higher ad rates. On average US and Canada users earn Facebook $7 per month from ads. But those willing and able to pay are probably richer than the average user, so luxury businesses pay more to advertise to them, and probably spend more time browsing Facebook than the average user, so they see more of those ads.
Brace for sticker shock, because for Facebook to offset the ad revenue of these rich hardcore users, it might have to charge more like $11 to $14 per month.
With no bonus features, that price for something they can get for free could seem way too high. Many who could afford it still wouldn’t justify it, regardless of how much time they spend on Facebook compared to other media subscriptions they shell out for. Those who truly can’t afford it might suddenly feel more resentment towards the Facebook ads they’ve been scrolling past unperturbed for years. Each one would be a reminder that they don’t have the cash to escape Facebook’s data mines.

But perhaps it’s just as likely that people would feel the exact opposite — that having to see those ads really isn’t so bad when faced with the alternative of a steep subscription price.
People often don’t see worth in what they get for free. Being confronted with a price tag could make them more cognizant of the value exchange they’re voluntarily entering. Social networking costs money to operate, and they have to pay somehow. Seeing ads keeps Facebook’s lights on, its labs full of future products, and its investors happy.
That’s why it might not matter if Facebook can only get 4 percent, or 1 percent, or 0.1 percent of users to pay. It could be worth it for Facebook to build out a subscription option to empower users with a sense of choice and provide perspective on the value they already receive for free.
For more big news about Facebook, check out our recent coverage:
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Facebook is looking to self-police by implementing parts of the proposed Honest Ads Act before the government tries to regulate it. To fight fake news and election interference, Facebook will require the admins of popular Facebook Pages and advertisers buying political or “issue” ads on “debated topics of national legislative importance” like education or abortion to verify their identity and location. Those that refuse, are found to be fraudulent or are trying to influence foreign elections will have their Pages prevented from posting to the News Feed or their ads blocked.
Meanwhile, Facebook plans to use this information to append a “Political Ad” label and “Paid for by” information to all election, politics and issue ads. Users can report any ads they think are missing the label, and Facebook will show if a Page has changed its name to thwart deception. Facebook started the verification process this week; users in the U.S. will start seeing the labels and buyer info later this spring, and Facebook will expand the effort to ads around the world in the coming months.
This verification and name change disclosure process could prevent hugely popular Facebook Pages from being built up around benign content, then sold to cheats or trolls who switch to sharing scams or misinformation.
Overall, it’s a smart start that comes way too late. As soon as Facebook started heavily promoting its ability to run influential election ads, it should have voluntarily adopted similar verification and labeling rules as traditional media. Instead, it was so focused on connecting people to politics, it disregarded how the connection could be perverted to power mass disinformation and destabilization campaigns.
“These steps by themselves won’t stop all people trying to game the system. But they will make it a lot harder for anyone to do what the Russians did during the 2016 election and use fake accounts and pages to run ads,” CEO Mark Zuckerberg wrote on Facebook. “Election interference is a problem that’s bigger than any one platform, and that’s why we support the Honest Ads Act. This will help raise the bar for all political advertising online.” You can see his full post below.
The move follows Twitter’s November announcement that it too would label political ads and show who purchased them.
Twitter’s mockup for its “Political” ad labels and “paid for by” information
Facebook also gave a timeline for releasing both its tools for viewing all ads run by Pages and to create a Political Ad Archive. A searchable index of all ads with the “political” label, including their images, text, target demographics and how much was spent on them, will launch in June and keep ads visible for four years after they run. Meanwhile, the View Ads tool that’s been testing in Canada will roll out globally in June so users can see any ad run by a Page, not just those targeted to them.
Facebook announced in October it would require documentation from election advertisers and label their ads, but now is applying those requirements to a much wider swath of ads that deal with big issues impacted by politics. That could protect users from disinformation and divisive content not just during elections, but any time bad actors are trying to drive wedges into society. Facebook wouldn’t reveal the threshold of followers that will trigger Pages needing verification, but confirmed it will not apply to small to medium-size businesses.

By self-regulating, Facebook may be able to take the wind out of calls for new laws that apply to online ads buyer disclosure rules on TV and other traditional media ads. Zuckerberg will testify before the U.S. Senate Judiciary and Commerce committees on April 10, as well as the House Energy and Commerce Committee on April 11. Having today’s announcement to point to could give him more protection against criticism during the hearings, though Congress will surely want to know why these safeguards weren’t in place already.
With important elections coming up in the US, Mexico, Brazil, India, Pakistan and more countries in the next year, one…
Posted by Mark Zuckerberg on Friday, April 6, 2018
For more on Facebook’s recent troubles, check out our feature stories:
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Facebook is scrambling to add safeguards against abuse of user data as it reels from backlash over the Cambridge Analytica scandal. Now TechCrunch has learned Facebook will launch a certification tool that demands that marketers guarantee email addresses used for ad targeting were rightfully attained. This new Custom Audiences certification tool was described by Facebook representatives to their marketing clients, according to two sources. Facebook will also prevent the sharing of Custom Audience data across Business accounts.
This snippet of a message sent by a Facebook rep to a client notes that “for any Custom Audiences data imported into Facebook, Advertisers will be required to represent and warrant that proper user content has been obtained.”
Once shown the message, Facebook spokesperson Elisabeth Diana told TechCrunch “I can confirm there is a permissions tool that we’re building.” It will require that advertisers and the agencies representing them pledge that “I certify that I have permission to use this data”, she said.
Diana noted that “We’ve always had terms in place to ensure that advertisers have consent for data they use but we’re going to make that much more prominent and educate advertisers on the way they can use the data.” The change isn’t in response to a specific incident, but Facebook does plan to re-review the way it works with third-party data measurement firms to ensure everything is responsibly used. This is a way to safeguard data” Diana concluded.The company declined to specify whether it’s ever blocked usage of a Custom Audience because it suspected the owner didn’t have user consent. ”
The social network is hoping to prevent further misuse of ill-gotten data after Dr. Aleksandr Kogan’s app that pulled data on 50 million Facebook users was passed to Cambridge Analytica in violation of Facebook policy. That sordid data is suspected to have been used by Cambridge Analytica to support the Trump and Brexit campaigns, which employed Custom Audiences to reach voters.

Facebook launched Custom Audiences back in 2012 to let businesses upload hashed lists of their customers email addresses or phone numbers, allowing advertisers to target specific people instead of broad demographics. Custom Audiences quickly became one of Facebook’s most powerful advertising options because businesses could easily reach existing customers to drive repeat sales. The Custom Audiences terms of service require that businesses have “provided appropriate notice to and secured any necessary consent from the data subjects” to attain and use these people’s contact info.
But just like Facebook’s policy told app developers like Kogan not to sell, share, or misuse data they collected from Facebook users, the company didn’t go further to enforce this rule. It essentially trusted that the fear of legal repercussions or suspension on Facebook would deter violations of both its app data privacy and Custom Audiences consent policies. With clear financial incentives to bend or break those rules and limited effort spent investigating to ensure compliance, Facebook left itself and its users open to exploitation.
Last week Facebook banned the use of third-party data brokers like Experian and Acxiom for ad targeting, closing a marketing featured called Partner Categories. Facebook is believed to have been trying to prevent any ill-gotten data from being laundered through these data brokers and then directly imported to Facebook to target users. But that left open the option for businesses to compile illicit data sets or pull them from data brokers, then upload them to Facebook as Custom Audiences by themselves.
The Custom Audiences certification tool could close that loophole. It’s still being built, so Facebook wouldn’t say exactly how it will work. I asked if Facebook would scan uploaded user lists and try to match them against a database of suspicious data, but for now it sounds more like Facebook will merely require a written promise.
Meanwhile, barring the sharing of Custom Audiences between Business Accounts might prevent those with access to email lists from using them to promote companies unrelated to the one to which users gave their email address. Facebook declined to comment on how the new ban on Custom Audience sharing would work.
Now Facebook must find ways to thwart misuse of its targeting tools and audit anyone it suspects may have already violated its policies. Otherwise it may receive the ire of privacy-conscious users and critics, and strengthen the case for substantial regulation of its ads (though regulation could end up protecting Facebook from competitors who can’t afford compliance). Still the question remains why it took such a massive data privacy scandal for Facebook to take a tougher stance on requiring user consent for ad targeting. And given that written promises didn’t stop Kogan or Cambridge Analytica from misusing data, why would they stop advertisers bent on boosting profits?
For more on Facebook’s recent scandals, check out TechCrunch’s coverage:
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LinkedIn wasn’t built for low-skilled job seekers, so Facebook is barging in. Today Facebook is rolling out job posts to 40 more countries to make itself more meaningful to people’s lives while laying the foundation for a lucrative business. Businesses will be able to post job openings to a Jobs tab on their Page, Jobs dashboard, Facebook Marketplace, and the News Feed that they… Read More
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At the core of Facebook’s “well-being” problem is that its business is directly coupled with total time spent on its apps. The more hours you pass on the social network, the more ads you see and click, the more money it earns. That puts its plan to make using Facebook healthier at odds with its finances, restricting how far it’s willing to go to protect us from the harms… Read More
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Everyone’s least favorite ads are coming to Facebook, but six-second pre-rolls will only appear on original Watch tab videos you purposefully view and not in the News Feed. Facebook is embracing pre-rolls after years of shunning them as it tries to make payouts to video creators sustainable. Read More
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Facebook is still in the middle of its House Intelligence Committee hearing about Russian election interference, but the looming concerns over misuse haven’t dampened its business as profits continue to soar and its share price hits an all-time high. Still, CEO Mark Zuckerberg saw it fit to break from his traditional “Our business is doing well” script to add “But none… Read More
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You might think you’re impervious to Facebook’s ads, but you probably do get seduced every once in a while. But because ads aren’t always permanently available anywhere, it can be impossible to find a Facebook ad that led somewhere you want to revisit. Now Facebook has a solution called Recent Ad Activity for when (if) you click an ad and want to see it again. Read More
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