Facebook goes on the ad attack: Spots work 'just like TV' but privacy fears may hit new initiatives

“We now know that not only do people see the ads,” she said." "We know they ring the cash registers.”

But some of Facebook's ideas to make best use of its 900 million users are "reigniting concerns about privacy," said the Wall Street Journal.

Recently, the social network has begun allowing marketers to target ads at users based on the email address and phone number they list on their profiles, or based on their surfing habits on other sites., reports the WSJ.

"Most rankling for privacy advocates, Facebook is using its data trove to study the links between Facebook ads and members' shopping habits at brick-and-mortar stores."

Advertisers (no names) have been participating in the studies . In principle, a shampoo maker could learn how much viewing an ad on Facebook increases sales across a range of retailers.

But the social network, said the WSJ, is "treading a fine line between using consumer data to attract marketer dollars - and living up to its promises to users and regulators to keep that data private".

Gokul Rajaram, who manages Facebook's ad products, insisted, "We have been working to make it easier for marketers to reach the right people at the right time and place." The ad changes, he says, are done "in a way that respects user privacy."

Facebook says it doesn't sell data about individual users to advertisers, or even let them directly see the data . Still privacy advocates say Facebook deserves special scrutiny because it has in many cases more personal information about people's real identities than other Internet companies, raising the potential for abuse.

Last month, Facebook began allowing marketers with their own lists of email addresses and phone numbers to target ads at specific groups of Facebook users of at least 20 at a time.

The WSJ gave as examples a clothing store, using the service to target customers based on their past purchase habits, or a bank targeting ads just at customers with high bank balances.

Despite its current woes, analysts think Facebook could eventually establish its own advertising network,with Facebook ads everywhere across the Web and on smartphones.

In August, the social network said it was working with data-mining company Datalogix to track whether seeing ads on Facebook led users to buy more products from advertisers in physical stores.

Datalogix collects information from retailers about what customers buy and works with Facebook to find out (from e-mail addresses for example) who may have seen Facebook ads for particular products.

Market Watch's Jon Friedman has reported, said Facebook, that tests on nearly 50 Facebook ad campaigns, show that in 70% of cases, $1 spent on Facebook advertising leads to $3 in incremental sales.

Last week, the US Electronic Privacy Information Center filed a complaint with the Federal Trade Commission over Facebook's new business practices, particularly its relationship with Datalogix and an ad-buying service called Facebook Exchange.

Facebook says it is confident it is compliant with its legal obligations. With Datalogix, it said, both sides obscure their data from the other so they can't use it to build profiles of people.

The open question, said the WSJ, is whether Facebook users will find the services unsettling enough to stop using the site.

Facebook says users click on better-targeted ads — which is a sign that they like them.

Online retailer Shoebuy took part in a test allowing marketers to show ads to Facebook users based on what they've looked at elsewhere online.

Using Facebook Exchange, Shoebuy placed ads on Facebook.com only to members who recently viewed shoes on its site.

A third-party marketing company TellApart Inc. identified when Facebook members recently used their browsers to also visit the shopping site. TellApart then acted as an ad broker, offering to buy ads targeting those people. In the process, neither side swaps personal information, the companies say.

The result was impressive, said Shoebuy Chief Marketing Officer James Keller.The ads provided at least a seven times return on investment.

Previously, Facebook "has not been the best place for us to advertise," he said. "Now we are taking whatever inventory we can in the Facebook Exchange because it is working."

The Facebook Marketing Solutions team "were not mincing words in their messaging during Advertising Week," said Adweek. "Their sales language has arguably never been either this precise or this eyebrow-raising.

A study of 50 campaigns by DataLogix found that Facebook advertisers’ physical store sales were the result of a click only one percent of the time.

Ninety-nine percent of sales were from consumers who saw an ad but didn’t click it. Facebook's Brad Smallwood repeatedly said Facebook ads work "just like in TV."

Smallwood later told Adweek . “Branding does work online," he said. "When someone sees a message, that impression leads to in-store purchases. It’s the same as in TV.”

The new Facebook Exchange is off to a tremendous start with its 15 ad tech firm partners, according to Facebook.

“We think it’s going to unlock a significant amount of spend around the globe,” said Carolyn Everson, Facebook vp of global marketing solutions. “We are seeing anywhere from 4X return on investment to 15X. And we are seeing marketers signing up every day."