Debate over online privacy and behavioural targeting heats up

This week the debate on online privacy heated up further with the US FTC coming out with a strict online privacy report that put behvaioural targeting networks on red alert. I’d like to use this post to provide a summary of the technology and the issues in the mix.

Behavioral targeting advertisers can target users by interests via their internet ‘behaviour’ i.e. which sites they visit, what type of content they’ve spend time on etc. Advertisers and publishers claim that BT is beneficial to users by showing them only relevant advertising thereby improving their web experience. On the other hand web surfers are generally ad agnostic, finding online banners either irrelevant or creepy. Most of us trawl hundreds of sites in a year, some of which we stop by only briefly or discretely. The thought that big companies are keeping a track every step on this trail and serving ads based on the cumulative data is scary.

The abililty to offer behavioural targeting is a great hook for publishers and ad networks to get large offline advertisers on board online advertisers. Data from Emarketer shows 1 in every 5 US Display dollars by 2014 will be linked to BT and that this tactic is twice as effective as RON ads. These advertisers can now use the large sets of psycographic data they have at their disposal through market research to target users by their lifestyles and behaviours. Knowing where someone likes to vacation, the kinds of cars they are interested in allows powerful interest – based targeting. As users visit different websites within an ad network, a profile is built and the user is bucketed in one of pre-defined segments and served ads when he visits another website that is part of the same network. The technology has been refined over the years and now most major network and publishers including Yahoo, Facebook and Microsoft offer this service, with revenues from this tactic poised for strong yearly growth.

Last week the Federal Trade Commission (FTC) in the US announced support for a measure that requires publishers to offer a “Do Not Track” option so users can “opt out” of data collection. Another suggestion is to have a symbol on every online ad that will give users access to see who sent the ad and what data is being collected about them. Overnight Microsoft announced that its Internet Explorer 9 would have ‘Tracking Protection’ functionality allowing users to manage which organisations have access to their data.

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Digital Agencies – Looking Beyond Metrics & Media Forecasts

“Online to take over Print by 20XX”
“Online grows X% YOY, traditional media growth slows down”

These days not a week goes by that we don’t receive a new media forecast proclaiming the rise of online media. Only the growth percentages and years in the forecasts change. Most of these numbers are of course brought out by media groups with heavy investments in digital or interactive industry organisations.

My view is that these big growth percentages are expected because online is starting off a small base. So we (I work in online) have to start looking for big shifts in actual $ value numbers before we start beating drums. There are still challenges to overcome until Digital agencies can become viable businesses or standalone profit centres rather than token add-ons of large media agencies. Hoping that the above mentioned rosy media forecasts and our complex array of measurable metrics will keep each of us profitable only betrays a lack of vision. The big 5 challenges (in random order) are:

  1. Lack of attribution

From what I have seen the top 20 Australian brands do not have a significant online shopping presence i.e. their consumer’s research online, but buy offline for lack of choice. Now, you can throw stats at clients and tell them 60% of customer’s research online but until you can show them that those customers went on to buy at the store and not because there was a stall at the mall they don’t see the value of taking money from another media. Online needs to show that clicks delivered online can be attributed to a sale through a call-centre or a retail outlet. Traditional advertising has been using brand track studies, online surveys and retail figures to justify their spends for decades.

2. Small pool of prospects

There are some surefire online categories – Finance, Travel, Dating, Real Estate – unfortunately every big agency chases these. These clients have online business models and hence do not need to be sold on the value of online marketing to their businesses. But these big fish are also tough to snare and often have deep relationships with their offline agencies who may have their own online practices. So it’s a case of few fish and too many agencies.

3. Not getting a fair go

Attend an all-Agencies weekly WIP and you’ll often find the Media Agency dominating the discussion. Yes, traditional media agencies have relationships that go back longer with their clients and hence get more face time. Most C-level marketers started off at a time when traditional media were the only choices on a media plan and are averse to new media and its perceived complexity. With most media agencies headed by luminaries with illustrious records (and awards), media weightages can be swayed on reputation alone. Digital agencies and divisions must still rely on the crumbs on the table after the offline agency is finished.

4. Online isn’t a mass brand channel

Online doesn’t have the pulling power of TV yet. Big live events like cricket, AFL, Melbourne Cup and phenomenons like Master Chef aggregate audiences in a way no online property can.  Advertisers want to attach their brands to proven properties their target audience watches, even if their ads reach audiences outside their primary segments. People use the Internet to seek information, play games,  socialize on networks and watch videos. Not to watch ads in minuscule boxes or to click away from their favorite website to an advertisers website. Over decades we’ve learnt to accept advertisements on TV and as the quality has improved we’ve even grown to love them. The success of Gruen Transfer is proof of this.

5. Clients love traditional media

As a marketing client, I always looked forward to the days when the Creative & Media agency came in to the office. It was exciting and creative and put my boss in a good mood. Seeing the advertisements on TV or on a city billboard, also assured everyone from the CMO to the Finance Head that I was busy. Now in the complex work of Digital, be it developing search campaigns or setting up campaign tracking, clients have lesser scope to input and offer subjective opinion. The mass of metrics that Digital and PPC agencies churn out each week in voluminous excel spreadsheets also isolates them from their clients even more.

So there it is, a few challenges outlined, based on my own experience on both sides of the fence. In my next post I’ll touch upon a few strategies for Digital Agencies to consider in future.