This is how Facebook learns what you buy at physical stores in order to show you relevant ads — and how to opt out

If you recently bought something at a physical store, you might have noticed an uptick in the number of Facebook ads you saw related to that store or the item you bought.

The phenomenon – which has been documented by Reddit and Twitter users – is not a coincidence.

Through its partnerships with retailers, Facebook learns about what users are buying, both online and in brick-and-mortar stores. That data is ultimately used to target ads to people, based on what they’re likely to spend money on.

Facebook has been using information about “off-Facebook activity” since August, and the practice is still rolling out globally, a spokesperson told Business Insider. It’s already being used by a range of Facebook’s advertising clients, including Macy’s and Dick’s Sporting Goods.

The spokesperson emphasized that data about what people buy off of Facebook is hashed before it’s matched to their accounts, meaning Facebook doesn’t retain logs of your past purchases – instead, what Facebook does retain is the fact that your account was “matched” to a specific retailer.

Ad money comprises the lion’s share of Facebook’s revenue – of the $17.6 billion the company made in the third quarter of 2019, $17.3 billion came from ads. Part of what makes Facebook appealing to advertisers is the fine-tuned demographic information on users it offers, borne out through its tools that allow for hyper-targeted ads.

Business Insider asked Facebook to explain how it learns about people’s offline purchases. Here’s how the process works, and how to opt out.

The process begins when you buy something, either online or in a store. The retailer may retain information about you from the purchase.

If that retailer has an ad partnership with Facebook, it sends Facebook your email, phone, name, zip, city, state, country, date of birth, gender, and age, or fragments of that information, according to a Facebook spokesperson.

Facebook only needs a few data points from retailers in order to create a “custom audience,” or a group of users it determines have shopped at that retailer.

According to a study published earlier this year, algorithms are capable of confidently identifying people based on just a few anonymized data points – and few companies have as much user data as Facebook.

That data is hashed before it’s uploaded to Facebook and is removed after users are matched to retailers, according to a Facebook spokesperson.

Hashing is a common data-privacy practice that converts plain-text data to code that can only be read by an algorithm, and can only be decoded with a specific key.

After the hashed data is deleted, what remains is the match — that is, Facebook has used the information from retailers to match specific user profiles to that business.

From there, the retailers can buy ads on Facebook that will be shown directly to the “custom audience” of users matched to them.

Several retailers are already using the “off-Facebook activity” functions for buying ads on Facebook, including Macy’s and Dick’s Sporting Goods.

“With store visits custom audiences, we re-engaged customers who had visited one of our stores with a targeted Facebook ad,” a Dick’s Sporting Goods spokesperson said in a statement. “And, using lookalike audiences, created from people similar to those who visited our store, opened up a broader audience of new customers for us to reach, driving incremental foot traffic and sales.”

A Macy’s spokesperson said the retailer has used Facebook’s tool to drive more in-store sales.

“We are encouraged by the positive results we saw in-store and are excited to continue testing Facebook’s offline suite to fuel our growth,” the spokesperson said.

Users can opt-out of off-Facebook activity tracking by going to their Facebook settings, selecting “Ads,” and disallowing “ads based on data from partners.”

Facebook also offers a tool to let people check whether an ad is specifically targeting them. To use the tool, select “Why am I seeing this ad?” from the dropdown menu on the top right of the ad.

Source: BusinessInsider