Why All the Fuss About Behavioral Advertising?

March 21, 2011 at 7:28 am Leave a comment

A marketer’s view.

By Mary Ludloff

I recently read an article (online of course) in Time about data mining and how companies know everything about you. For those of you “not in the biz” but curious about the whole data privacy/security debate that is taking off, this is a must read. It walks you through how your information is collected and what is done with it. As a marketing professional (I am using my big words today), none of this is surprising. This direct quote from the article pretty much sums it up:

“Each of these pieces of information (and misinformation) about me is sold for about two-fifths of a cent to advertisers, which then deliver me an Internet ad, send me a catalog or mail me a credit-card offer. This data is collected in lots of ways, such as tracking devices (like cookies) on websites that allow a company to identify you as you travel around the Web and apps you download on your cell that look at your contact list and location. You know how everything has seemed free for the past few years? It wasn’t. It’s just that no one told you that instead of using money, you were paying with your personal information.”

Now we write quite a bit about data privacy (heck, Terence and I are writing an Ebook about it) and this may surprise you, but today’s post is not about privacy so much as it is about behavioral advertising: what it is, what it isn’t, and the law of unintended consequences.

I have a unique vantage point both as a marketer that uses behavioral advertising and as an executive at PatternBuilders, a company that makes tools that are often used in behavioral targeting. Translation: I spend money on advertising and make decisions about my spend based on metrics like click-through and conversion rates, amongst others, as well as adjust my marketing spend across channels (like social media, online advertising, etc.), based on ROI.  Our solution, PatternBuilders Analytic Platform, plays a very large role in helping to analyze “behavior” particularly in newer marketing channels, such as social media, which increases the likelihood  of more useful, and perhaps far more “intrusive,” behavioral insights. In other words, I market for a company and in an industry that is, in some profound ways, changing how I market today and into the future. Sometimes that’s pretty cool, or scary, or just different but it’s never boring.

So what is behavioral advertising? First off, behavioral advertising is also known as behavioral targeting or behavioral marketing.  Notice that with each of these terms, the word behavioral is front and center. That’s because it’s based on how you behave (where you go) online. So, if my “website travels” indicate that I love Hawaii (targeted behavior), then I would see ads for trips to Hawaii when I am on a travel site whereas someone who loves Alaska would see ads for trips to Alaska on the same travel site. Think of it as your own personal version of online advertising. You get served up ads based on where you go and what you do because your “behavior” is being tracked and from that behavior, assumptions are being made about you.

Why engage in behavioral advertising? Well, in theory they are more targeted. This means that I am able to reach a more “interested” audience with ads that are more relevant because I know much more about the group that I am targeting. In terms of metrics, my click-through and conversion rates go up. Keep in mind that I pay more for behavioral advertising because I get better results but since my ROI is greater it’s still a better deal. For those of you wanting to drill down a bit more on behavioral advertising, there’s an excellent post on how and why it works by Terri Wells.

Okay, some of us don’t mind ads and some of us feel inundated by them but the concept of targeted advertising has been around forever. In the olden days remember how our mailboxes were filled with all kinds of offers or how we seemed to get phone calls about buying or selling something every hour? For example, I own a timeshare and I still get direct mail and phone offers to buy it from various companies. Funnily enough, I never see an online ad about it (most likely because I’ve never gone to a site about selling timeshares or searched on the keyword term).

Now, the way in which you are targeted is based on where you go and what you do online. For example, Google (through an advertising cookie) tracks your online behavior and then infers demographics (like age and gender) and interests (you like reality shows for example) from it. You can go here to see what it knows about you, change your interests, as well as opt out from being tracked. Keep in mind that you will still be “advertised” to but you will not be behaviorally targeted. Lots of companies track your behavior and there’s a whole bunch of companies, like eXelate, that sell your information. But for the most part, this “information” does not identify you specifically. Rather, it puts you in a group of people with similar demographics and interests and that group is then “rented” to someone like me to advertise (online of course) to.

Again, not so bad. Of course, there are companies who do not behave well (see our post on data privacy lawsuits) and there is the law of unintended consequences to contend with: how else is this “behavioral data” used, especially when it can now be aggregated and analyzed to the extent that a very detailed profile of you can be developed? And what’s worse: an accurate or inaccurate profile?  Yep, this is where the fuss comes in.

Now if you read the Time article (see my first paragraph) you may, like me, have been surprised by how cavalier the author, Joel Stein, was about all this data floating around about him. Here’s how he summed it up:

“We’re quickly figuring out how to navigate our trail of data — don’t say anything private on a Facebook wall, keep your secrets out of e-mail, use cash for illicit purchases. The vast majority of it, though, is worthless to us and a pretty good exchange for frequent-flier miles, better search results, a fast system to qualify for credit, finding out if our babysitter has a criminal record and ads we find more useful than annoying. Especially because no human being ever reads your files. As I learned by trying to find out all my data, we’re not all that interesting.”

Hmm…. on this we disagree. In concept, there is nothing “morally wrong” about behavioral advertising as long as the consumer is aware of it and as long as we protect that data from unintended (there’s that word again) usage (like government agencies profiling you or insurance companies denying you coverage). But today it’s very difficult (and confusing) for the consumer to manage their online privacy. Are you really going to read every site’s privacy policy, investigate how Google, Yahoo, and Bing track your behavior, monitor that your opt outs are being honored? As a pretty sophisticated user of digital data, I have a hard time keeping all this straight! Consumers need straight forward guidelines about personal data collection and usage of that data needs to be regulated and protected. Behavioral advertising isn’t the problem, it’s just the tipping point for a debate on how all of our digital data is collected and used.

Entry filed under: Data, General Analytics, General Business. Tags: , , , .

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