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Facebook Disables Option to Bar Multi Ethnicity Groups in Ads

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Per Reuters, Facebook Inc FB has now “temporarily disabled” the option that lets advertisers exclude certain racial groups from their target audience. The move comes after ProPublica’s expose that it could buy “discriminatory” housing ads and could easily dodge the social media giant’s ad review process.

Under The Fair Housing Act (1968) and the Equal Credit Opportunity Act (1974), it is illegal to keep out any section of the society on grounds of race, ethnicity, or sex for housing/credit. In fact, any ad that discriminates between people based on race, religion and sex is considered a felony in the United States.

This is not the first time that ProPublica has been able to dodge Facebook’s review process. In September 2017, ProPublica, a non-profit organization that takes up investigative journalism in public interest, claimed that Facebook’s self-serving ad platform “enabled advertisers to direct their pitches to the news feeds of almost 2,300 people who expressed interest in the topics of “Jew hater,” “How to burn jews,” or, “History of ‘why jews ruin the world.”

The outlet also claimed that it paid $30 to test if this was actually true. It paid the amount to target those groups with three promoted posts and much to its dismay, Facebook just took less than 15 minutes to approve these ads.


Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote

Post the expose, COO Sheryl Sandberg was quoted by Reuters saying, “Until we can better ensure that our tools will not be used inappropriately, we are disabling the option that permits advertisers to exclude multicultural affinity segments from the audience for their ads.”

The company has reportedly also added that it is conducting a study on how advertisers are able to exclude certain racial groups (including LGBT community) and such ads will now be subjected to stringent review. The measures will be elaborated in the time to come.

Facebook has been in dire straits this year regarding its ads review process. The Russian ad fiasco (related to Brexit and U.S presidential elections) caused extensive PR damage. The company testified to the U.S. Congress regarding the alleged misuse of its platform and is meeting with European regulators next week.

To salvage the situation, the company has put in place monetization eligibility standards to make it clear that creators and publishers, which meet its strict guidelines, will be eligible to earn money on its platform. Repeated failure to comply with these terms will result in removal of access to the monetization features.

Not just Facebook, brand safety issues plagued Google’s YouTube earlier this year. This year in March, YouTube ran into trouble with advertisers as it was revealed that some ads ran before extremist videos, prompting advertisers to withdraw their ad spots, per media reports. Consequently, Google had to tighten its ad policy to lure advertisers back.

Facebook carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In the past year, shares have increased 53.5% compared with 25.3% increase seen in the industry.

Stocks to Consider

Better-ranked stocks in the broader technology sector include Groupon Inc GRPN, Activision Blizzard ATVI and HP Inc HPQ. While Groupon sports a Zacks Rank #1 (Strong Buy), Activision Blizzard and HP carry a Zacks Rank #2 (Buy).

Long-term earnings growth rate for Groupon, Activision and HP is currently projected to be 10%, 13.8% and 5.3%, respectively.

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