Facebook and Housing Discrimination

The Social Network, Housing Discrimination, and Ads

Facebook has caught a lot of flak in recent months, from influencing elections to data privacy issues to extremist views being broadcast on its platform. But one offense you might not think of when I say "Facebook" is housing discrimination. 

When I first read the headline, "Housing Department Slaps Facebook With Discrimination Charge," I did a double take. Most of us would be forgiven for failing to immediately see the link between the world's largest social network and housing discrimination. 

The link lies in Facebook's advertising practices, which also happen to be its financial lifeblood, with digital advertising accounting for almost 90% of total revenues. US law, through the Fair Housing Act, stipulates, "It is unlawful to make, print, or publish, or cause to be made, printed, or published, any notice, statement, or advertisement with respect to the sale or rental of a dwelling that indicates any preference, limitation, or discrimination based on race, color, religion, sex, familial status, national origin or disability, or that indicates an intention to make such a distinction. 42 U.S.C. § 3604(c)" In addition to housing, there also exist similar laws that restrict discrimination in advertisements for both employment and credit opportunities.

Clearly, Facebook was in violation of this law (they have since "'removed the advertisers' ability to target housing, credit and jobs ads by age, gender, ZIP code and other characteristics in ways that could be considered discriminatory.") In the HUD's filing, they use Facebook's own words against them (Facebook used this to promote its ad services): Facebook's advertising platform enables advertisers to"[r]each people based on . . . zipcode . . . age and gender . . . specific languages . . . the interests they’ve shared, their activities, the Pages they’ve like[d] . . . [their] purchase behaviors or intents, device usage and more." Sounds like if someone used Facebook to reach a certain age group ot advertising housing, then Facebook would be in violation of the Fair Housing Act. For what it's worth, I've run a Facebook ad before, and I clearly recall being able to tailor my ad's audience by filters like ZIP code, age, and gender.

There's a deeper issue that can be extrapolated from this suit: the incompatibility between the law and Facebook's value proposition to advertisers. Again, let me reiterate that 90% of Facebook's revenues come from advertisers. Advertising is the heart and soul of Facebook (at least financially), but this core competency is being seriously threatened by increased legal scrutiny by governments.

For an advertiser, the entire point of running a Facebook ad is to be able to reach targeted audiences that spend time on Facebook's platforms. The keyword here is targeted. Why do companies throw vast sums of money at Facebook (and Instagram) ads? The reason that Facebook is such a compelling platform for advertisers is twofold: first, it provides access to over a billion of people, and second (more importantly), it allows advertisers to effectively differentiate across that vast population in order to get ads in front of the right audience. Facebook makes its money almost exclusively from allowing advertisers to find specific audiences. 

If Facebook is deprived of this ability to allow advertisers to target specific audiences, then its allure to advertisers is drastically diminished. Personally, I once ran a Facebook ad to promote an event to a specific audience (Duke students aged 17-22 with certain interests), and if I were not able to do that through Facebook, then I probably would not have used Facebook for advertising. If an advertiser was similarly unable to target a specific audience through Facebook, then Facebook would also be of little to no utility to them.

Per US law, Facebook is now unable to offer much value to major advertising segments, namely housing, employment, and credit. Facebook's profits in these three regulated segments essentially depend on breaking federal law, and that's never a good business model. Certainly, this does help explain some of the almost $13 million Facebook has spent on lobbying. In this case, Main Street reigns over Big Tech.