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By Mitchell Kelly

If you’re a regular user of Facebook, no doubt you’ve seen ads on your newsfeed with an uncanny relevance to you or what you’ve been doing. Things you’re sure that Facebook should have no way of knowing.

Say for example, an ad spruiking car insurance right after you’ve bought a new car. Or, perhaps an ad for a hotel in the exact city you’re planning to travel to next month.

The first time this happens, it’s easy shrug it off as a fluke or coincidence, but once you have the same experience a second and third time, you may begin to ask yourself – how do they know? And probably more to the point – what else do they know?

To answer this, let’s take a look at the different ways Facebook ads are targeted.

Facebook’s data

Facebook has a treasure trove of data it provides advertisers use of to target ads on its platform. Most of this, we freely provide to them; our age, gender, relationship status, job title, workplace, interests etc.

None of this should come as a surprise to anyone at this point.

What may surprise is just how far targeting on the social network now extends beyond this.

Advertisers’ data

For starters, Facebook allows advertisers to use their own data to target users. By adding a piece of Facebook code onto their website, an advertiser can target ads to those users who have visited their website and not purchased.

If an advertiser has a past customer list of email addresses or mobile phone numbers, they can upload this to Facebook for Facebook to match to its users and then target ads to them.

2nd Party data

Advertisers are also able to share their own data with other advertisers. A car dealership could for example, share details of new car buyers with an insurance partner to target on Facebook.

You would see an ad for car insurance, never knowing the real reason how Facebook knows.

3rd Party data

The next-frontier of Facebook ad targeting has come with the help of 3rd party data providers.

These companies collect data on consumers from various different sources – rewards cards, surveys, even bank and credit card transaction data – and match it to people online.

Let’s take a look at a specific example.

Woolworths purchased a 50% stake in a data company 3 years ago in an effort to better leverage their wealth of customer data. Woolworths’ loyalty program, better known as Woolworths Everyday Rewards, has more than 9 million members according to Woolworths itself.

Most of these 9 million consumers swipe their rewards card every time they go through the checkout, recording all of their purchases and building a rich profile of their purchase behaviour.

So what happens to this data?

While Woolworths uses the data to better understand their customers, and for their own internal marketing, they’re not the only ones using it. Pre-packaged and custom-built segments of this data are also sold to advertisers wanting to laser-target ads to consumers.

Because Woolworths Everyday Rewards accounts are setup online using an email address and mobile phone number, OR directly with a Facebook account, Facebook is easily able to match Facebook accounts to these segments.

woolworths rewards sign up
For the average advertiser, these targeting options are not actually available. If you’re a small business, you won’t have access to these segments in your Facebook ads manager by default.

For larger companies with big budgets, however, access to custom or pre-built segments can be special requested and bought.

Let’s take the real-world example of one particular cosmetic company.

This company wanted to know whether their Facebook ad buys were having any measurable effect on sales. They also wanted to reduce wasted advertising spend by focusing on cosmetic buyers, and in particular, those who bought their competitors’ products.

Through Woolworths Everyday Rewards data, a custom segment of buyers of their competitors’ products was created and made available to them in Facebook. Using this segment, they were able to laser-target ads to the exact people they wanted to reach. Not only that, they were then able to measure the uplift in in-store sales of the users who were shown these ads against a control group that weren’t, to see the true return of their investment.

For those not in the current digital marketing space, it’s natural to feel uneasy about how all if this is happening, even slightly violated. It should be known, however, that all this data is linked anonymously, in aggregate, to your profile and advertisers never know the exact people who they are targeting – only that they share the defining characteristic of the segment.

Advances in targeting like these have also helped produce more relevant ads for consumers as well as reducing wasted ad spend – producing better results, for cheaper.

In saying this, with the extent to which big data is now being used from both online and offline sources to target ads, there’s no doubt that consumers need to be aware of what is happening behind the scenes as well as being allowed to take more ownership of their own data.

Facebook have certainly made more than a token effort to do this. If you visit your ad preferences section, which you can find underneath settings in your Facebook profile, you will be shown the interest groups Facebook has classified you into as well as some of the more common ways advertisers are targeting you with their ads.

One area which is conspicuously absent in there is any mention of 3rd party data segments or any in-depth explanation of the more advanced targeting methods Facebook is now using. With the extent to which this is now happening, Facebook needs to take greater responsibility in informing its users of what exactly is going on behind the scenes.

To help illustrate exactly how Facebook and Woolworths are able to match offline consumer purchases with online Facebook profiles, we’ve put together the following infographic.

how facebook targets ads based on supermarket purchases