Exploring the Online Micro-targeting Practices of Small, Medium, and Large Businesses

TL;DR

This study investigates how small, medium, and large businesses use Facebook's micro-targeting features, revealing that most advertisers outsource micro-targeting to platforms, which employ algorithmic-driven targeting, impacting policy considerations.

Contribution

It provides the first detailed analysis of advertiser types and their micro-targeting practices on Facebook, highlighting the role of platform algorithms in targeting.

Findings

71% of advertisers are small/medium-sized businesses

Only 30-32% of businesses micro-target their ads

Facebook's algorithms perform significant micro-targeting

Abstract

Facebook and other advertising platforms exploit users data for marketing purposes by allowing advertisers to select specific users and target them (the practice is being called micro-targeting). However, advertisers such as Cambridge Analytica have maliciously used these targeting features to manipulate users in the context of elections. The European Commission plans to restrict or ban some targeting functionalities in the new European Democracy Action Plan act to protect users from such harms. The difficulty is that we do not know the economic impact of these restrictions on regular advertisers. In this paper, to inform the debate, we take a first step by understanding who is advertising on Facebook and how they use the targeting functionalities. For this, we asked 890 U.S. users to install a monitoring tool on their browsers to collect the ads they receive on Facebook and information about how these ads were targeted. By matching advertisers on Facebook with their LinkedIn profiles, we could see that 71% of advertisers are small and medium-sized businesses with 200 employees or less, and they are responsible for 61% of ads and 57% of ad impressions. Regarding micro-targeting, we found that only 32% of small and medium-sized businesses and 30% of large-sized businesses micro-target at least one of their ads. These results should not be interpreted as micro-targeting not being useful as a marketing strategy, but rather that advertisers prefer to outsource the micro-targeting task to ad platforms. Indeed, Facebook is employing optimization algorithms that exploit user data to decide which users should see what ads; which means ad platforms are performing an algorithmic-driven micro-targeting. Hence, when setting restrictions, legislators should take into account both the traditional advertiser-driven micro-targeting as well as algorithmic-driven micro-targeting performed by ad platforms.