Under the direction of CEO and founder Mark Zuckerberg, Facebook built tools to help the world's largest brands target ads to consumers with data-enhanced precision.
Then the company stood idly by as scammers hijacked those tools and used them to sell sham products and services to gullible consumers.
Shortly before news broke this morning that Zuckerberg would testify before at least two Congressional committees - while shunning lawmakers in the UK, Bloomberg published a detailed feature about the world of scammers, charlatans and hucksters who use Facebook's marketing tools to sucker unsuspecting Facebook users into buying their shoddy wares.
Thanks to the social network's influence, a lucrative cottage industry has been created to help connect sellers of sham goods - everything from "miracle" diet pills to "male enhancers" - to buyers. In addition to the manufacturers, there now exists a layer of so-called affiliate marketers: Middlemen who by online ad space in bulk then offer to create and place advertisements for companies in exchange for sales commissions.
To be sure, these mercenary marketers work for legitimate companies, too - eBay and Amazon are two notable companies that hire affiliate marketers. But by far the largest profit margins can be obtained by working with sellers of dietary supplements and other extremely high-margin goods.
The top affiliates—virtually all of them young men—assemble a few times a year to learn the latest schemes and trade tips about gaming the rules set by social networks and search platforms. They think of themselves as kin to the surfers-slash-bank-robbers of the 1991 movie Point Break, just more materialistic, jetting from nightclub to Lamborghini race while staying a step ahead of the authorities. One San Diego crew took in $179 million before getting busted last year by the Federal Trade Commission for violating three laws governing online conduct.
Bloomberg's story begins with a trip to the aptly named "Stack That Money" conference, described as the "Davos for digital hucksters" - a conference in Berlin for affiliate marketers hosted by a popular web forum. But as Bloomberg points out, visitors could be forgiven for thinking Facebook organized the conference.
The Berlin conference was hosted by an online forum called Stack That Money, but a newcomer could be forgiven for wondering if it was somehow sponsored by Facebook Inc. Saleswomen from the company held court onstage, introducing speakers and moderating panel discussions. After the show, Facebook representatives flew to Ibiza on a plane rented by Stack That Money to party with some of the top affiliates.
It was hard to believe that Facebook would cozy up to disreputable advertisers in mid-2017 as it was under intense scrutiny from lawmakers and the media over revelations that Russian trolls had used the platform to influence the 2016 presidential election. Officially, the Berlin conference was for aboveboard marketing, but the attendees I spoke to dropped that pretense after the mildest questioning. Some even walked around wearing hats that said “farmin’,” promoting a service that sells fake Facebook accounts.
But while the conference was ostensibly organized on behalf of legitimate marketers, attendees dropped their cover at the slightest provocation, speaking freely about the tools and strategies they use to evade protections on platforms like Facebook that filter out spammers and scammers.
Facebook, they explained, had revolutionized the world of digital scamming. The key to the whole puzzle is an indispensable software program called Voluum which allows the affiliate marketers to manage their "campaigns."
The program was invented by a man named Robert Gryn. With an estimated net worth of $180 million, he's one of the richest men in Poland.
Granted anonymity, affiliates were happy to detail their tricks. They told me that Facebook had revolutionized scamming. The company built tools with its trove of user data that made it the go-to platform for big brands. Affiliates hijacked them. Facebook’s targeting algorithm is so powerful, they said, they don’t need to identify suckers themselves—Facebook does it automatically. And they boasted that Russia’s dezinformatsiya agents were using tactics their community had pioneered.
When I asked who was at the heart of this game, someone who could explain how the pieces fit together, the affiliates kept nominating the same person. He was a Pole who’d started out as an affiliate himself, they said, before creating a software program called Voluum—an indispensable tool they all use to track their campaigns, defeat the ad networks’ token defenses, and make their fortunes. His name was Robert Gryn.
Gryn strutted into Station Berlin like a celebrity, wearing a trim gray suit, a shiny gold watch, and gold-rimmed mirrored sunglasses. He was trailed by a personal videographer, and men he didn’t recognize ran up to him for bro hugs.
Only a few years ago, Gryn was just another user posting on Stack That Money. Now, at 31, he’s one of the wealthiest men in Poland, with a net worth estimated by Forbes at $180 million. On Instagram, he posts pictures of himself flying on private jets, spearfishing, flexing his abs, and thinking deep thoughts. Last year he posed for the cover of Puls Biznesu, a Polish financial newspaper, with his face, neck, and ears painted gold. Gryn’s prominent cheekbones, toned biceps and forearms, perfectly gelled pompadour, and practiced smile lend him a resemblance to his favorite movie character: Patrick Bateman, the murderous investment banker played by Christian Bale in American Psycho.
During their conversation, Gryn explained how the industry works.
The basic process isn’t complicated. For example: A maker of bogus diet pills wants to sell them for $100 a month and doesn’t care how it’s done. The pill vendor approaches a broker, called an affiliate network, and offers to pay a $60 commission per sign-up. The network spreads the word to affiliates, who design ads and pay to place them on Facebook and other places in hopes of earning the commissions. The affiliate takes a risk, paying to run ads without knowing if they’ll work, but if even a small percentage of the people who see them become buyers, the profits can be huge.
And he also explained how Facebook has made the grunt work of affiliate marketing much, much easier. Furthermore, the company has only recently taken serious steps toward combating these advertisers.
Ben Dowling, one of only three such employees when he was hired in 2012, says Facebook was focused on checking whether ads followed policies about things such as the percentage of text and images, and not on catching people with bad intentions.
Affiliates once had to guess what kind of person might fall for their unsophisticated cons, targeting ads by age, geography, or interests. Now Facebook does that work for them. The social network tracks who clicks on the ad and who buys the pills, then starts targeting others whom its algorithm thinks are likely to buy. Affiliates describe watching their ad campaigns lose money for a few days as Facebook gathers data through trial and error, then seeing the sales take off exponentially. "They go out and find the morons for me," I was told by an affiliate who sells deceptively priced skin-care creams with fake endorsements from Chelsea Clinton.
Most of the efforts undertaken by Facebook to guard against the practice could be easily circumvented using Gryn's software. And yet, Gryn appears to have a cordial relationship with Facebook - even visiting the company's London offices to meet with top executives.
The company hired a few dozen reviewers in Austin and Hyderabad, India, to look over ads that users or algorithms had flagged as questionable and ban accounts that broke the rules. But affiliates evaded them using a subterfuge they call "cloaking." It was easy, especially if you were running Voluum.
Gryn’s software allows affiliates to tailor the content they deliver according to a number of factors, including the location or IP address associated with a user. The feature is useful for ad targeting—for example, showing Spanish speakers a message in their native language. But it’s also a simple matter to identify the addresses of Facebook’s ad reviewers and program campaigns to show them, and only them, harmless content.
Those who were caught and banned found that this was only a minor setback—they just opened new Facebook accounts under different names. Some affiliates would buy clean profiles from “farmers,” spending as much as $1,000 per. Others would rent accounts from strangers or cut deals with underhanded advertising agencies to find other solutions.
Even after banning the accounts of unscrupulous marketers, Facebook salespeople would still come to industry meetups.
Affiliates say Facebook has sent mixed signals over the years. Their accounts would get banned, but company salespeople would also come to their meetups and parties and encourage them to buy more ads. Two former Facebook employees who worked in the Toronto sales office said it was common knowledge there that some of their best clients were affiliates who used deception. Still, the sources said, salespeople were instructed to push them to spend more, and the rep who handled the dirtiest accounts had a quota of tens of millions of dollars per quarter. (He left Facebook last year.)
Considering the speed with which Bloomberg published this rather lengthy feature, we imagine it won't be the last story about the company's shady business practices we see before the furor dies down. The initial stories about Cambridge Analytica opened Pandora's Box. Now, it's open season on Facebook: And America's media companies - who have long suffered at the hands of the revenue-siphoning social media behemoth - have been waiting for an opportunity to exact their revenge.