October 2016

Facebook’s ability to let advertisers target a specific audience—for instance, women between the ages of 25 and 34 with young children—is its primary strength. More and more advertisers count on being able to identify, and market to, very specific groups. But Facebook’s advertising system not only allows marketers to choose who they most want to see their ads—it also allows them choose entire groups who will never see their ads. When placing an ad on Facebook, advertisers can explicitly exclude lots of groups, including people with any given educational level, financial status, political affiliation, and—perhaps most disturbingly—“ethnic affinity.”

"Targeting ads for housing, credit, or employment based upon race, gender, or sexual orientation violates the federal civil-rights laws that cover those fields—the Fair Housing Act, the Equal Credit Opportunity Act, and Title VII,” says Rachel Goodman, a lawyer at the American Civil Liberties Union. “If Facebook is going to allow advertisers to target ads toward or away from users based on these sensitive characteristics, it must at the very least prohibit targeting in these three areas central to economic prosperity.” A better ad-buying platform might involve a system under which ads in areas where the U.S. has key civil-rights legislation—such as housing, credit, or employment—that also include ethnic targeting automatically get flagged for review. That type of due diligence already exists in the industry.

Is AT&T’s $85 billion bid for Time Warner the triumph of hope over experience? It is certainly true that the last two mega-mergers involving Time Warner fell far short of their promise. After the 1989 marriage of Time Inc. and Warner Communications, for instance, it took seven years for investors to see any real gains in the combined companies’ stock. But even that painful deal paled in comparison to the 2001 merger of AOL and Time Warner. That was the worst combination in corporate history, at least until 2008, when Bank of America bought Countrywide Financial, the toxic mortgage lender.

This time it’s different, contends Randall L. Stephenson, AT&T’s chairman and chief executive. He called the merger “a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers.” There’s something for all investors in this corporate marriage, AT&T says: Those seeking earnings growth will benefit as well as investors on the hunt for income. For one thing, the company expects the combination to begin adding to earnings the year after it closes — a quick turnaround by traditional standards. And it also says the takeover will improve its so-called dividend coverage. That’s the measure of how much excess cash AT&T has to cover its 5.3 percent dividend. Company executives always make promises when they announce big deals. But talk is cheap, delivery costly.