The report claims the leaked information shows how Facebook "has been honing the covert tools it uses to gain useful psychological insights on young Australian and New Zealanders in high school and tertiary education."

The Australian news website said it has seen internal research documents that show how people's posts on Facebook classify them as feeling "stressed," "anxious," "nervous" or other negative emotions. The report says that advertisers could use this information to target teens "when they are potentially more vulnerable," something that Facebook denies.

Facebook has been analyzing the emotions of teenagers and acknowledges it passed along the information to an advertiser in violation of its policies, according to published reports.

The social media giant shared the information with an advertiser, according to USA Today.

"We have a process in place to review the type of research we perform and in this case that process was not followed," Facebook said in a statement to the newspaper.

Facebook said advertisers cannot target users based on their emotional state, according to USA Today.

In an emailed statement to CNBC, a Facebook spokesperson said the premise of The Australian article was "misleading."

"We do not offer tools to target people based on their emotional state," the statement said. "The analysis done by an Australian researcher was intended to help marketers understand how people express themselves on Facebook. It was never used to target ads and was based on data that was anonymous and aggregated."

This isn't the first time that Facebook has been criticized for monitoring users' emotions. In 2014, it studied how nearly 700,000 people responded to changes in their news feeds, finding that positive and negative sentiments were contagious, something an expert at the time called a "terrible thing to do."

"When positive expressions were reduced, people produced fewer positive posts and more negative posts; when negative expressions were reduced, the opposite pattern occurred. These results indicate that emotions expressed by others on Facebook influence our own emotions," the paper by the Proceedings of the National Academy of Sciences of the United States of America stated.

Advertisers have to abide by Facebook's policies, while the site's privacy policy states that it uses information it has about people to "conduct surveys and research, test features in development, and analyze the information we have to evaluate and improve products and services, develop new products or features, and conduct audits and troubleshooting activities."

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