Facebook is working with data-tracking company Datalogix to monitor which adverts its users are viewing, and whether they are purchasing the advertised products in stores afterwards.
By purchasing data on more than 70 million American households, including details of loyalty card accounts, Datalogix is able to match Facebook email addresses to card holders and monitor which products they are buying, and whether there is a correlation between the Facebook adverts they have seen and their shopping habits.
When it is shown to advertisers, personal data, such as email addresses, is organised into groups of anonymous people rather than naming any individuals. The idea is to help business recognise the right demographics for their products, and to target their advertising directly via Facebook.
The new initiative comes after a disastrous six months for Facebook stock, which has dropped to $22 (£13) since opening at $38 in May. Investors and business have expressed doubt over Facebook's ability to directly advertise to users who are accessing the website on smartphone apps rather than desktop PCs.
Facebook is hoping to counter claims that it cannot generate advertising revenue from mobile users. Brad Smallwood, Facebook's head of measurement and insights, told CNN that the partnership with Datalogix had been very successful so far, and that in seventy percent of cases, every dollar spent by a marketer on Facebook advertising generated $3 of revenue in return.
But issues are being raised as to whether Facebook's new advertising technology contravenes the $9.5 million dollar settlement struck with the Federal Trade Commission earlier this year, on charges that users' private data was not being used by the social network as promised.
"We don't believe any of this online-offline data should be used without express consumer approval and an opt-in" said Jeff Chester, of the Centre for Digital Democracy, a privacy rights group which believes Facebook is not giving users enough control over how their information is used.
The Datalogix announcement comes only days after Facebook was forced to cancel using its controversial facial recognition technology in Europe, a new feature that would have been able to 'tag' users in uploaded photographs by matching their facial features to their account.
Speaking to the Financial Times, Irish Data Protection Commissioner Billy Hawkes - who oversees Facebook's European headquarters in Dublin - said:
"I am satisfied that the review has demonstrated a clear and ongoing commitment on the part of [Facebook] to comply with its data protection responsibilities...I am particularly encouraged in relation to the approach it has decided to adopt on the tag suggest/facial recognition feature by in fact agreeing to go beyond our initial recommendations, in light of developments since then, in order to achieve best practice ...by doing so it is sending a clear signal of its wish to demonstrate its commitment to best practice in data protection compliance."
Facebook also issued a statement to the FT, explaining that it would aim to use the face-mapping technology in the future, once privacy regulations had been agreed upon:
"This audit is part of an ongoing process of oversight, and we are pleased that, as the Data Protection Commissioner said, the latest announcement is confirmation that we are not only compliant with European data protection law but we have gone beyond some of their initial recommendations and are fully committed to best practice in data protection compliance."
The statement went on to explain that Facebook would only launch its facial recognition feature "once we have agreed an approach on the best way to notify and educate users."
Facebook users are being automatically included in the new Datalogix data collection initiative, but can opt out using a link on Facebook's Help Centre page which redirects to Datalogix's website.
However, Datalogix and Facebook have continually assured users that individual data is kept anonymous and not shared directly with advertisers.