Brands are poring over legal documents to obey Facebook’s data rules

Facebook’s
founder and CEO Mark Zuckerberg speaks at the Viva Tech start-up
and technology summit in Paris, France, May 24,
2018.
REUTERS/Charles
Platiau

• Facebook is shutting down its
  Partner Categories ad program and replacing it with Custom
  Audiences, which will still allow third parties to work with
  brands in building audiences — but puts the data protection
  onus on marketers.
• Agencies and data brokers are working together directly
  to set up contracts but are r
  unning into legal
  snafus over which partners are responsible for data.
• The new program also exposes the exact fees that
  advertisers pay for data, which agencies say have opened
  marketers’ eyes to what they’re actually paying.
• The move comes as some brands question third-party data
  altogether because of new privacy and legal concerns.

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Facebook’s recent decision to clamp down on how brands can and
can’t use third party data for ad targeting is causing a boom in
legal work at agencies.

As Facebook continues to wind down Partner Categories — an ad
product which allowed big brands to access third-party data like
household income and loyalty programs from companies like Oracle
and Acxiom to deliver ads, agencies are shifting gears.

Advertisers now have the option to tap into a Facebook program
dubbed Custom Audiences, which still lets them work with third
parties data companies but removes Facebook’s involvement in
helping advertisers craft audiences.

In other words, when it comes to data, Facebook is dumping any
and all consumer protection responsibilities onto marketers.

As a result, brands and data brokers now work
together to create their own contracts, which are turning out
to include lengthy and sometimes muddy terms and conditions,
according to agencies.

Using third party data on Facebook is becoming messy, and pricey

In interviews with six agencies for this story, several execs
agreed that Facebook’s new guidelines around third-party data are
an important — if not necessary — step for the company as it
continues to seal up its platform against possible data mishaps
and privacy issues for advertisers.

The heat has been on Facebook over the past year to get its ad
targeting policies right, following the Cambridge Analytica mess,
accusations of Russian election meddling, as well as the rollout
of European Union’s General
Data Protection Regulation.

Some see Facebook’s decision to get rid of Partner Categories as
a way to protect consumers. Others see it as a way for the social
networking giants to assert more control of advertising on its
platform while dodging responsibility.

Besides the new moves to rework its relationships with third
parties, Facebook has also
rolled out transparency tools and eliminated
thousands of discriminatory ad targeting options for
advertisers, which are collectively geared at cleaning up the
platform for advertisers by putting new controls in place.

“Facebook has forced all our hands but I think it creates a good
opportunity in some ways to talk to clients about how to think
more deliberately about how they buy,” said Jon Taylor, SVP of
global data strategy at Essence. “Going through that process is a
little cumbersome because you have to do contracts — while that
may seem like a drag, [it] actually forces the market to watch a
lot more closely what they’re buying.”

Minerva Studio/Shutterstock

There is a lot of uncertainty when it comes to which parties are
liable for data usage on Facebook

While these changes may be making advertisers more aware of what
they are actually buying on Facebook, the transition from Partner
Categories to Custom Audiences has been rocky for some,
particularly with figuring out how liability for data breaks down
between parties.

“Selecting a segment from an audience marketplace and testing it
online is quite different then putting pen to paper with a direct
seller, making commitments and taking on more direct liability,”
Taylor said.

Plus, there are a sprawling number of ways that advertisers use
data on Facebook that slightly overlap with each other depending
on the use case that need to be ironed out in contracts:

• Brands own first-party data like email lists and website
  orders. But those data sets are usually too small to run big
  campaigns that target millions of users.
• Data providers pull in aggregated stats from surveys and
  store-loyalty programs to create large pools of third-party data
  — but it’s anonymous and often meshed with first-party data from
  brands.
• Agencies don’t typically own data but they do get paid by
  brands to manage it for brands.

That’s led to one big unanswered question that agencies are
mulling as they negotiate new contracts and deals: ‘Who is liable
for third-party data on Facebook if Facebook is not?’

“It is this phenomenal game of hot potato where everybody in the
space is trying to push the potential liability to somebody
else,” said Jeff Ratner, chief media officer at iCrossing.

“We’ve spent a lot of time looking at terms and understanding
where that liability may or may not rest. As an agency, even when
we’re working with clients’ first-party data, we’re saying to the
client, ‘you [have to] give us your customer base, you have to
validate that the information is usable in the exact use that
we’re proposing.'”

Brands are juggling
contracts with data brokers.
Carl
Court/Getty Images

Agency execs are becoming BFFs with their lawyers

On August 15, Facebook stopped
offering advertisers the ability to create audiences using
third-party data within its platform. Advertisers that created
third-party audiences before then can continue to run un-edited
campaigns through October 1 when Facebook will officially turn
off the spigot to the program and stop delivering campaigns.

As part of the shift, Facebook outlined
the terms and conditions for Custom Audiences in May. Since
then, agencies and data companies have spent hours poring over
the document to understand what exactly they are liable for.

“I’ve had endless conversations with our legal department in the
last two months,” said Anita Walsh, director of social strategy
at Horizon Media. “There are definite nuances around who owns the
ad account, for example. Is it the client or the agency on behalf
of the client?”

According to Facebook spokeswoman, “an agency acting on
behalf of an advertiser must comply with our Custom Audience
Terms. Those terms also require that anyone
uploading a Custom Audience on behalf of an advertiser must have
the authority as agent to the advertiser to disclose and use the
data on the advertiser’s behalf and will bind the advertiser to
the terms.”

Facebook acknowledged that some marketers found the terms
difficult to understand and has clarified one part of it. Last
Wednesday, the terms and conditions were updated with additional
information about how brands can work with agencies to run
campaigns.

Previously, the terms said that advertisers could not sell or
transfer their Custom Audiences. The update clarifies that
marketers can “independently work with partners off our platform
to create Custom Audiences, as long as they have the necessary
rights and permissions to do so.”

Facebook ad manager
Facebook

“Advertisers routinely work with agencies and data
providers to develop and manage their ad targeting audiences,”
Facebook
wrote in a blog. “For example, data providers and agencies
create, upload and then share certain Custom Audiences on behalf
of advertisers. So we’re clarifying our terms to make it clear
that advertisers can do this.”

According to Horizon Media’s Walsh, the high-level rationale
behind the changes were clearly communicated from Facebook. But
the actual process of switching between Partner Categories to
Custom Audiences has been “a bit challenging.”

“The concepts were well communicated and I think everybody
understood the reasoning, but the detail and the actuality of how
to implement the replacement or new process going forward took a
little longer than everyone would have hoped and went to the
wire,” she said. “The terms and conditions are long and that is
one of the elements that is most confusing currently — ensuring
that we as buyers who are deeply trained in buying Facebook ads
are equally as trained in what we can and cannot accept.”

“We have become great friends with our legal department over the
last two months.”

And data providers want to become BFFs with agencies

Without a direct spigot into Facebook’s platform, Cliff
Atkinson, RPA’s svp and executive director, said that data
providers are actively pitching agencies. Based on those pitches,
which walk advertisers through how they collect data, Atkinson
believes that data providers are liable for third-party data —
though he said that the discussions are still early.

“It definitely created a shift in how we work with data providers
moving forward,” he said. “They are almost seen as on equal
footing as our vendors or media partners now — we are doing more
direct deals with them.”

Acxiom CEO Scott
Howe
John Lamparski/Getty Images for
Advertising Week New York

Facebook’s US partners for Custom Audiences are Acxiom, Oracle,
and Experian. All three companies either declined to comment on
the record or did not respond to press queries for this article.

“These data providers are stepping up — they’re reaching out and
asking to have meetings, to present their offerings in a
different way,” Atkinson said. “They know that the availability
of their data on other platforms is no longer available and
they’re losing out on that revenue coming in. They need to do
some work and speak to agencies directly about the advantages of
using their data. Once you see multiple data providers reach out,
you want to get a clear understanding of what differentiates
their data versus one of their competitors.”

Essence’s Taylor agreed that data providers are ultimately
responsible for data used in campaigns. “Whatever is in that
agreement between the marketer and the data provider is the
backstop,” he said.

Brands are waking up to the costs of data. Some are asking
whether it’s even worth the trouble.

Third-party data has always been murky and hard for advertisers
to understand. Now Facebook is revealing exactly how much brands
pay to access it, which several agencies said has caused sticker
shock from clients.

Previously, a line within Facebook Ads Manager showed marketers
that purchased Partner Categories a blended rate for data costs
from its partnerships with providers. The language did not
disclose the exact percentage that advertisers paid for data but
said that up to 15% of spend went towards data costs.

Now under Custom Audiences, the cost of data is worked out
between advertisers and providers ahead of time in contracts and
is shown as a line item in invoices, breaking down the exact
percentage that advertisers pay for data-related fees.

Advertisers are learning
how much data really costs.
REUTERS/Gary Cameron

The move opens up transparency around fees. But it’s also
causing brands to wonder if paying for third-party data is worth
it.

At 15%, a million-dollar campaign would total $150,000 in
data fees, for example.

“There is certainly a very warranted discussion if we — the brand
— are willing to pay X percent of X CPM on any data set,” Horizon
Media’s Walsh said. “[We’re] doing a lot of tests and learning
approaches to learn if the results will pay back in upfront
investments in third-party data.”

Some marketers are rethinking third-party data altogether

To be clear, lots of advertisers don’t even use third-party data
in the first place and either use first-party stats or rely on
Facebook’s own powerful targeting tools to do the heavy
lifting. 

Direct-to-consumer brands and retailers collect data straight
from their shoppers while automakers, CPG brands and
entertainment marketers are some of the biggest spenders of
third-party data because they don’t have direct relationships
with their customers.

“We stress and focus on first-party data a lot,” said
RPA’s Atkinson. “We’ve seen that first-party data
outperforms third-party data.”

Before August 15 when Partner Categories ended, “a fairly high
percentage” of Horizon Media’s clients used third-party data.
“That percentage has certainly dropped,” Walsh said. “It may not
drop forever and it’s a significant testing period, but it’s very
likely to change across the board now that we see this
line-itemed cost and how the new user flow works.”

And with more scrutiny on data under laws like GDPR and
looming privacy laws
in California and elsewhere in the US, several agencies
stressed that they’re pushing brands to move away from relying on
third-party data.

“What clients should be thinking about [is] ensuring that the
data was acquired rightfully and that customer consent was
given,” said Guillaume Lelait, CEO of Fetch US. “Third-party data
is perceived a little murky by some clients with no clear
transparency of how it was acquired, so we are educating them on
the right steps to take to ensure this is compliant.”