Saturday, May 17, 2008

Behavioral Targeting and Consumer Privacy: New Media's Paradox

by Harry Wang, Research Analyst, Parks Associates

Contextual targeting is widely used in both the offline and online advertising worlds. But the wild-card nature of behavioral targeting could revolutionize how marketers interact with their target audience in an online world. Behavioral targeting is based on a proven assumption that the Web pages people visit and where they go from those pages indicate at least a presumptive interest in products related to the page topics. For example, repeat visits to a Web page featuring reviews for camcorders, coupled with subsequent Web visits to major electronic retailers, clearly indicates at least a curiosity about camcorders. If this type of data is combined with other Web traffic such as visits to baby portrait services, baby travel kits, and vacation packages, the marketer can be quite confident that this particular user plans to buy a camcorder to film a baby, perhaps during an upcoming trip. As a result, advertisers not only have in-depth knowledge of the customer but also can purchase ads along this user’s future “Web trail,” instead of serving ads only to camcorder-related Websites. Some publishers find behavioral-based targeting very useful for selling undervalued ad inventory.

For instance, The Wall Street Journal reported that in the past, NBC Universal Inc.’s iVillage found it difficult to sell ads next to its astrology section because few products and brands correlate directly with astrology. But “by identifying a particular consumer [through behavior targeting] and delivering an ad tied to his or her interests, that same ad spot is worth a lot more,” said Peter Naylor, senior vice president of digital media sales for NBC Universal.

Technology vendors have been trying for years to translate online behaviors and consumption habits into predictable product and service needs so that advertisers can deliver the appropriate marketing messages at the right moment and on the right Web pages. Over the last two years, their work has finally caught the attention of advertisers and publishers. Ultimately, contextual and behavioral targeting should and will be integrated to give advertisers the most reliable information about their audience’s interest and their surfing patterns. This level of granularity is a marketer’s dream but can easily trigger privacy concerns if the issue is poorly handled. Facebook’s original ad-targeting policies caused such a stir that the company eventually had to backtrack to pacify its users. Advocacy groups have already called on the federal and state governments to tighten privacy regulations in light of this and many other events that they say have given them grave concern over online properties’ ability to protect Web users’ privacy. Currently, the debate over privacy protection is centered on how advertisers use personal identifiers and whether behavioral targeting should be “opt-in” versus “opt-out.” (“Opt-in” means that consumers must give explicit permission; otherwise, advertisers/publishers cannot track consumer behaviors online. “Opt-out” is just the opposite: advertisers/publishers can track consumer behaviors online unless consumers explicitly notify advertisers to “opt-out.”) Marketers are leaning toward “opt-out” and argue that this policy is consistent with precedent set by anti-spam policies. Consumer privacy groups, however, are pressing for “opt-in,” and many want the creation of a “Do-Not-Track” list that allows consumers to opt out completely of all behavioral profiling and targeting. Marketers are lobbying hard against such a list for fear of a similar devastating effect that the “Do-Not-Call” list had on the telemarketing industry. They also point out that audience targeting differs from telemarketing because better targeting feeds consumers with the most relevant information that helps them make informed decisions.

This debate will continue until technology vendors and the business community come up with privacy guidelines for behavioral targeting to assure consumers and their privacy right advocacy groups. Technology providers can shore up support if they not only give their promise in writing but also design a data-scrambling mechanism that makes it difficult for anyone to extract personal information from an online behavioral database. Such a mechanism also needs to be independently verified for its intended use. The advertising industry might have to cough up additional funds to cover these extra efforts, but as the old saying goes, “No pain, no gain.” It is the only way for the advertising industry to move beyond this controversy and pursue a growing new media advertising market, which is expected to hit $12.6 billion in 2012.

This article was published for the 2008 CONNECTIONS™ Conference Industry Insights, the official publication of CONNECTIONS™.

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