Facebook’s Social Ads: Risking a Huge Privacy Slapdown for a Big Ad Upside

Facebook’s latest roll-out saw CEO Mark Zuckerman flanked by a cadre of blue-chip advertisers, new Microsoft investment, and a big new idea. Facebook says it’s positioned to drive “product demand” and create a potential new 400-billion-dollar-a-year marketing channel through Social Ads.

The plan is to use members’ online statements and actions as content, to be included with targeted advertising. So if Facebook knows who your friends are, it can feed you news about how they use the products advertisers want you to buy. Here’s an example.

Image: Example of Facebook Social Ad
But is the implicit consent in having taken a public action, or Facebook’s Terms of Use Agreement, enough to make this use legal? Its been just a year since Facebook’s and Zuckerberg’s last privacy fumble. This move could make Facebook the next decade’s Google–or the last decade’s CompuServe.

Facebook’s Big Idea
AdWeek quotes Facebook’s founder Mark Zuckerberg summing up the draw of social advertising:

“Nothing influences people more than a recommendation from a trusted friend,” Zuckerberg told a packed room of advertisers, agency executives and press. He called peer recommendations, “the Holy Grail of advertising.”

And he’s not alone in that assessment. Yahoo quotes a News Corp. executive saying social ads:

“…could herald the evolution of behavioral targeting as the greatest advance in Internet advertising since Google perfected keyword-targeted search ads seven years ago.”

“It changes everything,” said Michael Barrett, chief revenue officer at Fox Interactive Media, the News Corp. unit that includes MySpace. “Every form of targeting has been trying to get to what that individual is thinking about, passionate about and interested in. It defines the next generation of targeting.”

Why Facebook’s Big Idea Leads to the Law
Many laws anticipate the likelihood of advertisers seeking to use people’s names, images, or voices in advertisements. And there is a set of laws that sets a fairly high standard of consent. The New York Times points out that some state laws preclude the use of name, image, or voice without written consent. More broadly, tort law prohibits such use without consent as well:

Restatement of the Law, Second, Torts, § 652
§ 652C Appropriation of Name or Likeness
“One who appropriates to his own use or benefit the name or likeness of another is subject to liability to the other for invasion of his privacy.”

Facebook’s Noticably Weak Response
Chris Kelly, the chief privacy officer of Facebook, makes a lame defense in the New York Times update. He contacted the Times, which reported that “… he argued that it would be difficult for someone used in one of these ads to object because that person had already chosen to publicly identify themselves with the brand doing the advertising.”

In fact, the opposite seems more likely. Simply saying something nice about a brand in public is in fact much harder to interpret as consenting to be part of whatever ad campaign Facebook might sell. Really, which do you think is the legal reach?

What if the user went on the company’s Facebook page and said they hated the product? Would that be consent for an unlimited endorsement? Could an opposing company pay Facebook for this person’s assessment, and make that the basis for a negative competitive ad?

Facebook’s Point of No Return: the Absurdly Broad TOU
There’s a sign that will show if Facebook is in peril and out of viable legal defenses: Watch for any company official to reference their overly broad Terms of Use agreement. Fortunately, no one has done this yet; to do so would be to claim that Facebook can use, or sell, their user’s words and names however they like. (And to some degree, isn’t that exactly what Social Advertising, as described here, sets out to do?) 

If Facebook’s back is against the wall, this is the operational statement in their Terms of Use to watch for:

“By posting User Content to any part of the Site, you automatically grant, and you represent and warrant that you have the right to grant, to the Company an irrevocable, perpetual, non-exclusive, transferable, fully paid, worldwide license (with the right to sublicense) to use, copy, publicly perform, publicly display, reformat, translate, excerpt (in whole or in part) and distribute such User Content for any purpose on or in connection with the Site or the promotion thereof, to prepare derivative works of, or incorporate into other works, such User Content, and to grant and authorize sublicenses of the foregoing.”

This seems to claim that Facebook can do anything with the data users provide.  It broadly (and I believe incorrectly) asserts that they can sell or use information “for any purpose.”  They have users’ credit card numbers, uploads of address information from Outlook email programs, and photos. 

Laws prevent Facebook from using that information however they like; likewise, privacy laws should protect users’ names from being added to advertising without explicit consent.

The terms in the agreement seem hopelessly at odds with a vision of privacy in which individuals control their own personal information. The moment any Facebook official brings this part of the TOU into a privacy argument, the debate will be over. It has the potential to offend Facebook’s current subscribers into seeking a new service.

So Facebook’s big bet is that they can sell the idea of Social Ads to their users, while making an adequate defense on privacy fronts. And they’ll do both without drawing on their overly broad Terms of Use.  That’s a formidable challenge. But then again, Facebook’s CEO sees 400 billion reasons to give it a go.

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