Banks and credit unions accustomed to rapidly ramping up their ad campaigns on Facebook have been getting surprised with “your ads have been disapproved” emails amid the adoption of changed rules for ads concerning credit, recruitment and anything housing-related.
“Facebook has made a substantial change and it will definitely impact results and budgets.”
— Meredith Olmstead, FI GROW Solutions
The new Facebook policies, resulting from a legal settlement reached with anti-discrimination groups, became effective in late August 2019 after being announced in March. Broadly, they impact how specifically any advertiser (within the three business areas mentioned) can target individuals to receive its messages on the social media channel. In some ways targeting as institutions used to do it will not be possible.
“Where before we’d make strategic recommendations to segment and target audiences with different creative and messaging — for example, using female characters in ads targeting a female audience — that is no longer possible with these changes,” says James Robert Lay, CEO at the Digital Growth Institute. “So, in essence, we’re moving back to more broadcast-like messaging of one-to-many communication.”
“Facebook has made a substantial change and it will definitely impact results and budgets,” says Meredith Olmstead, CEO and Founder, FI GROW Solutions. “But social is still cheaper than most other digital ads and remains a great way to build rapport with new audiences and engage in a fun, informative, and educational manner.”
Financial marketers and agencies have been adjusting to how they use the social media platform, which brings in billions of dollars of advertising in the U.S. and Canada alone. Down the road, financial institutions may need to (or want to) readjust the philosophy behind their Facebook campaigns. The rule changes affect not only Facebook itself but also Instagram, which is owned by Facebook, as well as Facebook Messenger.
Let’s look at some details on Facebook’s changes and why this happened; marketers’ immediate reactions to the new rules; an idea on how to address the Facebook advertising channel differently; and some warning signs for the future.
Digital Marketing Meets Longstanding Social Concerns
For several years, as more aspects of financial services have been taken over by digitization, concerns have been increasing that unintentional credit discrimination could occur. Civil rights advocates have worried about the impact of credit analysis performed by artificial intelligence. The thinking has been that AI, able to adjust and evolve as it goes, could go down a wrong path and become discriminatory. A parallel concern has been that increased digitization could abet intentional discrimination.
In 2016 ProPublica, an investigative journalism cooperative, singled out Facebook in an article headlined “Facebook Lets Advertisers Exclude Users by Race.” The article attacked the ability Facebook gave advertisers to target audiences for their messages.
“Imagine if, during the Jim Crow era, a newspaper offered advertisers the option of placing ads only in copies that went to white readers,” the article opened. “That’s basically what Facebook is doing nowadays.” Facebook denied the accusation.
This article sparked concerns and multiple lawsuits, including both private suits and action by the federal Department of Housing and Urban Development. Facebook began negotiations with the groups pressing the private suits, including the National Fair Housing Alliance and the American Civil Liberties Union.
“While it is highly debatable whether the Equal Credit Opportunity Act or other fair-lending laws apply to social media advertising of this nature,” observes a blog by Ballard Spahr LLP, “regulators take the position that they do, and they sometimes explore these issues in examinations. It therefore is critically important for companies to be mindful of fair-lending risk when formulating their social media and other advertising plans.”
The following aspects of the detailed settlement reached between Facebook and the civil rights advocates are of most interest to banks and credit unions:
- Gender, age, and multicultural affinity targeting options will not be available when creating Facebook ads.
- Targeting ads by zip code will not be permitted. Ads must have a minimum geographic radius of 15 miles from a specific address or from the center of a city.
- Ads will not have targeting options that describe or appear to be related to personal characteristics or classes protected under anti-discrimination laws. (This includes race, color, national origin, ethnicity, gender, age, religion, family status, disability, sexual orientation, and other classifications).
- Advertisers promoting credit, housing, or employment ads will not be permitted to use Facebook’s “Lookalike Audience” tool. That tool enabled replication of a company’s current target group.
(Note that Facebook had not been requesting users’ race, but instead assigning an “ethnic affinity” to them based on Facebook pages and posts they engaged with.)
Ads promoting any of the three categories — credit, housing and employment — must be booked through a special portal, Facebook’s new “Special Ad Category.” Attempts to evade this portal for covered types of ads will result in the user being blocked — and then re-routed to the portal. Advertisers must also certify that they are complying with both Facebook’s policies barring discrimination and with anti-discrimination laws.
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How Facebook’s New Rules Impact Financial Institutions
Once the financial marketer checks off “Special Ad Category” in Facebook’s ad management function, that effort falls under the new rules. As Lightstream points out in a blog, “all new or edited ad campaigns must now comply with these rules or risk being paused until they are changed.”
The shift to the new rules entails some hurdles, and to a degree things remain fluid as practitioners try things out. The changes will impact at least all of the following: credit card offers, auto loans, personal and business loans, mortgage loans, and home equity loans and credit lines. Related forms of insurance, such as homeowners and mortgage coverage, as well as appraisals, are also covered.
“The biggest challenge with this new policy is controlling audience overlap,” says Ida Burr, Digital Ads Manager at FI GROW Solutions. “This happens when you have several different ad campaigns running at the same time to the same audiences. This will cause you to compete (bid) against your own ads to get into the same person’s newsfeed, which could increase cost and frequency. In the past I would break audiences up into age or location groups. I can no longer do that.”
Credit products that have an age component, such as mortgages for first-time homebuyers, will be harder to promote because age targeting is now banned. To reach those prospects, saturation may be necessary.
Burr suggests that some credit unions will be stymied because of the bar to using zip codes.
“We can still target ‘special ad audiences’ and customer audiences,” says Burr, “but our locational targeting is limited now to a 15-mile radius around a given location.”
James Robert Lay says some smaller brands may even find that too large an area. Olmstead says her firm’s strategy will be to use branches as the radius for much geographic targeting.
At this point experts are predicting that institutions will need to spend more on Facebook campaigns to meet their goals.
“Only time will tell exactly how this will impact client spending,” says FI GROW’s Burr. “Audiences will be bigger and less targeted so I think clients will need to spend more to get the same amount of qualified leads.”
One factor that may help is that while the “Lookalike” audience option is gone for these purposes, in an effort to avoid grandfathering-in any potential past discrimination, there is a new a tool to use.
“Facebook released a slightly different type of audience tool for Special Ad Categories called ‘Special Ad Audiences‘,” says Lay. “They operate like lookalikes, but instead of using demographic data to build similar audiences, they use interest and internet behavior. Facebook analyzes current customer interests and internet patterns to identify individuals with similar interests and behaviors to target.” Lay says the “Detailed Targeting” option remains in place and may prove helpful.
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A Different Way to Use the Facebook Advertising Channel
Lay suggests that the rules changes favor rethinking how to use Facebook for financial institutions.
“I see this as an opportunity to position and promote more helpful content instead of direct product offers,” says Lay “which in fact has the potential to pay dividends in the long run by positioning a financial brand as an expert guide in the markets they serve.”.
Lay says early efforts with this approach seem to be working. One client has done well — at a lower cost — by promoting an ebook, “The Complete Guide to Buying the Home You Love.”
Going for the educational push, rather than a direct sell, means “playing the long game of guiding a consumer through the buying journey,” says Lay. But he sees it promoting greater trust in the financial institution using that message, which may be superior in the long run.
The ebook effort has resulted in 125 downloads, leading to 18 in-person consultations, says Lay. And so far three mortgages have been closed.
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What Will Financial Marketers See Over the Horizon?
If you love change, understand that things may not be over.
Notably, the settlement covered earlier also contains Facebook’s pledge to hire “academics, researchers, experts, and civil rights and liberties advocates, including the plaintiffs, to study the potential for unintended biases in the algorithmic modeling used by social media platforms.” That’s a wild card.
Further, other actions remain outstanding, concerning Facebook marketing, even after the March 2019 settlement. The HUD lawsuit continues and New York’s Department of Financial Services is investigating lenders’ use of Facebook for advertising.
“There seems to be a groundswell of regulatory concern about targeting of digital advertising based on protected characteristics under anti-discrimination laws, and especially targeting on the Facebook platform,” observes a Ballard Spahr blog. “Financial services companies need to be aware of the characteristics that they are consciously using to target advertisements, and also need to inquire of third parties about the factors used to create ‘lookalike’ campaigns.”