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VCG Auctions and Fake News

Senators have moved toward creating a bill that requires companies like Facebook to disclose who is purchasing their ads in light of a government investigation that revealed that groups affiliated with the Russian government had bought 3,000 ads during the 2016 election in order to sway voters through the social media platform. These ads pushed and amplified beliefs held by the Trump campaign on divisive topics such as Black Lives Matter, with some ads propagating the movement and some ads tearing it down, going so far as aligning Muslim women with Democrats for Hillary in ads to more conservative users. Russia was able to manipulate who would receive what ads by playing Facebook’s ad marketing algorithms. Because the algorithms select what ads to show through the Vickrey-Clarke-Groves auction system rather than a first or second price auction, the ads introduced ideas of discord, division, and perhaps fake news by targeting people who had previously shown interest in ideas of the same school of thought.

The Vickrey-Clarke-Groves (VCG) auction system is unique because instead of offering the highest bidder the advertisement slot, it takes into account the “harm-done-to-others” factor and awards the most socially optimal and beneficial-to-user slot to the advertiser. This system is used by Facebook because their aim is not to make the most profit off of the advertisement but to have it integrated seamlessly into the user’s timeline. Utilizing a combination of keyword search and VCG, Facebook is able to present ads that users value. In theory, this is beneficial because it encourages advertisers to bid their true value, however, because it is a closed auction and factors in keyword search there is a lack of transparency as to which ads are presented to whom. Russia was able to game this system by using people’s political and demographics characteristics and the words and likes correlated with such characteristics to implement narratives in advertisements for events related to social justice, or community organizations against certain causes that users would learn to value and trust.



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October 2017