Since about September, Facebook has offered its advertisers a powerful new way to track its users as they surf the Web: It's called "phone number retargeting." (The move comes separately to Facebook's effort earlier this year to collect its users' mobile phone numbers to prevent security breaches.)
More recently, according to AdExchanger, Facebook has also developed a new "conversion pixel" — basically a type of tracking device — within ads displayed on Facebook.
The combination of phone retargeting and conversion pixels theoretically allows advertisers to target you directly with ads and then measure exactly how you respond to them, whether by clicking, ignoring, or buying something from the advertiser's site. The process is anonymous, in that advertisers can't identify you by name. They do know, however, that they're targeting you based on your phone number.
Some advertisers have been doing this kind of thing on other websites for years. But most Facebook users don't know it's going on within Facebook.
The primary reason Facebook prompts users for a mobile phone number is to prevent account hacking. Earlier this year, Facebook began asking every user for a phone number for "security" purposes. Here's what Facebook says about that:
Those numbers, it turns out, are NOT being sold to advertisers.*
Rather, Facebook also collects users' phone numbers when they are entered in other parts of a users' account information. Those numbers are then made available to advertisers as part of its new Custom Audience targeting product. "Audiences can be defined by either user email address, Facebook UIDs, or user phone numbers," the product states.
Here's how it works: Let's say you are a member of your local gym. You probably gave the gym your phone number. But then you let your membership lapse, and now the gym wants to persuade you to come back. The gym can cross-reference its list of members' phone numbers with users' phone numbers on Facebook, and serve an ad on the page of any user with a matching number. Suddenly, you're seeing ads that say, "Get 10% off if you rejoin your local gym!"
Advertisers can combine such a campaign with ads that carry a conversion pixel, which will enable a "cookie" to track what you do so that the gym can see how successful its campaign was.
There's a level of privacy built in to the system: Although your phone number will be targeted by ads, the number will be "hashed," meaning that the system disguises it by replacing it with random code, making you anonymous. So the gym might target 100 phone numbers, but it won't know which of those specific people actually responded to the ad (until they pay for a membership online, of course). All the gym will know is that a certain number responded to the ad, and that those users must have been on the original phone list.
*Correction: This item originally said, incorrectly, that security phone numbers were used for advertiser retargeting. The company tells us that these numbers are kept separate and NOT used for that purpose.
Disclosure: The author owns Facebook stock.
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