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Is Facebook smartphone just a new way to collect data about you? (+video)

Facebook's smartphone launch raises alarms with consumer advocates who worry that more ease for consumers also means less privacy, as Facebook extends its capacity to mine personal data.

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In 2010, a federal judge approved a $9.5 million settlement of a class action lawsuit involving a program that published what users were purchasing without their permission. The next year, the Federal Trade Commission announced a settlement with Facebook that said it allowed advertisers to glean personal information from users and share that information with outside app developers, even after those accounts had been deleted. Facebook was not fined, but was forced to get the explicit consent of users when sharing information and is subject to privacy audits for the next 20 years.

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Privacy groups set off alarm bells once again in February this year, when Facebook announced partnerships with four data-mining companies that specialize with collecting online data as varied as credit card transactions, web browsing habits, and legal records, in an effort to help advertisers “show more relevant ads” to its users.

“We believe the extension of custom audiences to include select third parties will further improve marketers’ ability to reach the right customers on Facebook and will lead to more relevant ads,” Facebook said, in a statement.

Each company specializes in different sectors that impact consumers’ lives. One such company, Datalogix, based in Westminster, Colo., says on its website it has data on “almost every US household and more than $1 trillion in consumer transactions” involving the purchase of over 1,400 “leading brands” made in over 8,000 stores.

“We made it our mission to leverage the power of purchase-based audience targeting to drive measurable online and offline sales,” the company states.

Acxiom, another company based in Little Rock, Ark., says it manages over 15,000 databases, including court records, financial service companies and government documents, and processes about 13 trillion consumer transactions a quarter for its clients, which comes from sectors including financial services, retail, travel, communications, health care, and more.

“When companies work with Acxiom, we make it easy for them to establish strong ties with customers by helping them better understand what customers like, what they want and the best ways to communicate with them,” the company states on its website.

The other two companies working with Facebook are Epsilon of Plano, Texas, which specializes in collecting consumer transaction data, and BlueKai of Cupertino, Calif., a technology company that tracks user habits.

While Facebook insists it does not sell user data and has adopted the ability for users to “opt out” from allowing advertisers access to their personal information, privacy advocates say the issue is more about transparency than about how it uses its data.

“A lot of what happens with your cell phone is pretty sensitive stuff, and the fact that it is being collected indiscriminately and Facebook is pushing for more, is alarming," says Mr. Higgins of the Electronic Frontier Foundation. 

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