Facebook’s planned customer-data change called ‘land grab’ by publishers

In a controversial and as yet secret move, Facebook has proposed a policy change in the way it handles user data for mobile advertising. The move has alarmed some major Facebook publishing partners who see it as a power play and believe it will be bad for consumer privacy.

The problem

The publishers, speaking under the condition of anonymity, claim that after the change goes through on Nov. 4, Facebook will be putting them in an untenable position: Either they choose to forego mobile Facebook advertising, or they turn over to Facebook much of the data about customers installing their apps, including information the publishers say should be their own proprietary data. And for many big game publishers who are extremely dependent on Facebook for acquiring new users, they will effectively be forced into the latter option.

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These publishers worry this will give Facebook an unfair advantage by letting other publishers pay to target these same customers. The publishers also fret that providing Facebook with this customer data without getting appropriate permission could violate the privacy of their users installing their apps.

The details of the changes are complicated.

Facebook has confirmed some parts of the alleged changes in conversations with VentureBeat, but it contends that the publishers can still adequately determine their return on ad spend without turning over the extensive information — something that the publishers we’ve talked with deny.

It’s clear that while Facebook intends to move forward on Nov. 4, the exact policy alternatives for publishers are still being worked out.

The alleged power play is significant because mobile advertising is exploding worldwide, reaching an expected $100 billion next year, according to research firm eMarketer, and also overtaking desktop advertising in the same time frame. The company boasting the widest reach and deepest intelligence about such advertising will likely profit significantly. If it does this well, Facebook is poised to possibly nab that spot away from Google, which is currently the biggest player on the desktop and on mobile.

Facebook’s powerful position comes because it has amassed more than a billion users, and more publishers have come to depend on Facebook’s reach to drive their business growth. Game developers, for example, have led the charge in mobile advertising, using it to drive installs for their free-to-play apps. Among the large game companies that use Facebook mobile ads are Supercell, Machine Zone, King, and many more. In addition, 95 percent of the apps on the Apple and Google stores have Facebook integration. And mobile advertising accounts for 70 percent of Facebook’s $3.3 billion quarterly ad revenue.

Over the past five years, Facebook has paid more than $8 billion to large game developers building on its platform.

The power of mobile platform owners will be a topic at our MobileBeat conference next week in SF. We’ll be discussing Facebook’s proposed policy changes in several sessions of the agenda.

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That the stakes are so huge may be why Facebook is apparently making these moves behind the scenes and taking such pains to get it right by engaging the worried publishers with multiple in-person meetings to win them over — and delaying initiating the plan when it realized that it would come too fast for publishers.

Two stages of the proposed changes

The current Facebook strategy calls for the changes to unfold in two stages, according to our sources.

The first comes on Nov. 4, which is the date Facebook has informed its major game publishing partners that it will stop providing them with “device-level attribution data,” or precise information about customers who click on a publisher’s mobile ads while on the social network. VentureBeat has seen a copy of an email notification of this change sent by Facebook to the publishers.

On its face, this change could be considered good for consumer privacy, as it prevents any privacy abuses that could happen from distributing device level information.

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The problem is, this information is absolutely crucial for many of the publishers to have. Not having it could be life-threatening in some cases. That’s because game companies import the data into their sophisticated analytics platforms to calculate which users are worth paying for. They can layer on things like age and gender information, in ways that give them competitive edge. They’re so dependent on this data about users and what the users later do in these apps, they may be willing to pay the price that Facebook is reportedly asking to keep the important data coming.

That’s where the second move comes into play.

After Nov. 4, according to our sources, Facebook will assist the publishers with their lifetime value (LTV) and cohort (demographic group) calculations, but only if the publishers agree to hand over significant chunks of data about customers coming from their own organic sources. For example, if a customer downloads an app featured by Apple in its App Store, the publisher of the app would hand over the device-level ID and other engagement information to Facebook, even if that information is on consumers who have nothing to do with Facebook.

It’s this second move that hasn’t been finalized yet, because it has met the most resistance, to a degree that Facebook wasn’t expecting. It’s also the most controversial. At least one publisher has maintained Facebook has met with it several times to propose the move. Facebook has been reluctant to talk about the specifics, but it issued a statement Wednesday afternoon to VentureBeat after we inquired about Facebook’s latest position.

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“Facebook does not and has no plans to require advertisers, or mobile measurement partners acting on an advertiser’s behalf, to send us post-install data from their mobile app to understand the life-time value of their ads,” said Mike Manning, a spokesman for Facebook. “Our mobile measurement partners can determine an advertiser’s return on ad spend without Facebook receiving any post-install data. Any claims to the contrary are simply not true.”

It’s that second point, about being able to determine “return on ad spend,” that publishers reject. They say they can’t do accurate calculations with the information Facebook plans to give them. And it’s why Facebook, publishers say, has quietly floated the alternative, back-door way for publishers to get much more assistance.

Facebook, however, has declined to comment specifically on those confidential conversations.

Negotiations to date

The maneuvering started in mid-May, when Facebook first notified several of its biggest partners of the deadline for the first change, originally scheduled for Aug. 20. Several of these companies complained about the proposal, and one even threatened to stop spending money with Facebook, according to multiple interviews. Last week, Facebook then pushed back the proposed change to Nov. 4, apparently to buy more time. The massive social network is having separate conversations with individual publishers about its plans. The changes in play will mainly impact a subset of the big game publishers — the ones that are most reliant on the Facebook data.

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Smaller publishers are more likely to go along with the Nov. 4 plan.

While Facebook will stop giving device-level attribution data on Nov. 4, the details of what comes next are complicated. Until now, Facebook has allowed this attribution data to be collected by third-party measurement companies, including Adjust, Appsflyer, Tune, and Kochava. These companies have then forwarded this data to the publishers, which used it to figure out which users installed a game as a result of specific Facebook ads or campaigns.

As independent players, these measurement companies also collected data about successful campaigns outside of Facebook. But on Nov. 4, Facebook will force them to strip out any device-level attribution data pertaining to Facebook campaigns, which may deal a significant blow to these companies. Big publishers may see less reason to do business with them. They won’t be able to let publishers layer on data, such as age and gender, that allows publishers to do sophisticated cost calculations. Instead, only Facebook’s internal analytics solution will allow them to do that. Indeed, according to our publisher sources, Facebook’s plan is to become the new measurement source, by providing data to cooperative partners through its own App Events product.

At least one publisher said it wouldn’t be able to rely on its measurement partners any more — even though the publisher acknowledged Facebook wouldn’t be an unbiased measurement source.

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Until now, Facebook has often taken credit for app installs made a user that took several clicks to get to the install. For example, the user may have seen or even clicked on a Facebook ad, but may have actually been convinced to install the app by an ad from yet another source. The third-party measurement sources contend they have typically been more objective about assigning credit in these multiple click cases.

A hypothetical situation explaining the dispute

Here’s how one major publisher explained the change and its potential consequence, using a hypothetical situation.

• The game publisher buys ads on the Facebook mobile ad network and other mobile ad networks for a game. That game may get 1,000 installs per day, with 400 of them coming from clicks made on non-Facebook platforms.
• As before, the information the publisher gets from the non-Facebook platforms remains valuable, because the publisher can still get information about these 400 users, including whether a user engages with the app, or buys in-app promotions. The publisher can calculate important things like the lifetime value of a consumer, and thereby figure out if the benefit of advertising outweighs its costs.
• However, 600 of the hypothetical 1,000 of the users are considered “organic,” meaning the publisher does not know how they found the app. These users may have come from clicks made on Facebook, and thus may have come from the advertiser’s ads on Facebook. Or they may have come from other sources, such as Apple’s App Store. The publisher simply doesn’t know, because of the change on November 4 when Facebook stops providing device-level information.
• If the publisher wants any insights into the performance of ads on its network, Facebook will require the publisher to upload data on all of its organic installs, including both those who came via Facebook ads and those who did not. Facebook wants the device identification number for all of the consumer installs, as well as subsequent event data tied to these consumer IDs. That data includes all purchases or “value driving” activities within the app, including things like “session oriented data,” “level-completion data,” and “registration completion data.”
• Facebook will be able to use this data to optimize future ad spending that the publisher does with Facebook to target more users akin to the valuable ones paying money in the publisher’s game.
• Facebook will then bundle all of those consumers IDs and their event data and allow other Facebook advertisers to target those users.

Publisher: ‘Facebook is like the NSA’

The move seems aimed at replicating the ad-targeting capability that Facebook has on the Facebook Canvas, or the desktop version of Facebook, where all activity happened within the Facebook platform. That allowed it to get perfect data on a consumer and build an accurate profile, one publisher executive told us.

The difference here, the game executive continued, is the mobile consumers the game publisher tracks may never have agreed to allow Facebook to have this information. Facebook is instead getting this information from third parties sending it to them. Even if you never click on a Facebook mobile game ad, Facebook may get your device identifier, the fact that you installed a game, how many times you play, how much you have spent on the app, and what other apps you have installed.

Facebook can then have other advertisers directly target you based on your preferences and purchasing history.

Facebook representatives allegedly told game publishers that Facebook needs the additional data about users, collected by the game publisher, so that Facebook can definitively tell them which users click on Facebook ads. But the bad part about this from the game publisher’s point of view is that it now has to turn over all data about all of its users in the process of calculating what it needs to know about LTV. This is unacceptable, according to the publisher.

“Facebook is like the NSA,” another game publisher executive told VentureBeat, while similarly requesting anonymity for fear of retribution from Facebook.

The publishers fear Facebook will sell what they consider their proprietary data in aggregate form to other publishers, who can try to steal away their users.

Will Apple be pulled into this fight?

One game publisher said it went so far as to file a complaint with Apple.

Apple is significant here, because presumably the big phone giant will be concerned about the data of many of its App Store customers getting passed on to Facebook without the users agreeing to it. Also, many people view Facebook ads on Apple’s smartphones and tablets.

“This all seems like a gross overreaching by Facebook onto the Apple ecosystem at the expense of end-user privacy,” said one major game publisher.

Facebook has had its fill of privacy problems in the past. The several big missteps around user data in its past will no doubt have made Facebook hyper sensitive about the decisions it makes on its platform and the consequences for consumers. It knows it needs to have consumers fully trust Facebook with their data.

VentureBeat hasn’t received a comment yet from Apple.

We’ve heard that app makers of all kinds are receiving the same notifications from Facebook, beyond the two publishers we’ve cited in this story. The game publishers and other sources interviewed for this story hope that Facebook will quietly reverse itself and drop its demands.