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Behavioral Targeting on the Rise in 2006

Behavioral Targeting on the Rise in 2006 Neil Perry

Behavioral targeting advertising is projected to increase by 65 percent in 2006, as reported by interactive advertising agency media directors and planners who were attending the May iMedia Agency Summit at Amelia Island, Florida. Nearly 20.8 percent of all media purchases in 2006 are expected to be behavioral targeting purchases.

iMedia Communications joined forces with the Ponemon Institute to conduct this quantitative study of 73 companies attending the Amelia Island Summit meeting. Results were shared with the audience as part of an iMedia Insight presentation on behavioral targeting. The iMedia Agency Summit attendees represent companies that manage the majority of all online media purchases.

Behavioral targeting tracks consumer behavior on specific websites, or even over a network of ad sites, to determine an individual’s interest in a particular product or service, and then delivers an appropriate ad. For the most part, behavioral targeting tracks non-personally identifiable online behaviors, concentrating on pages visited to determine a consumer’s expected interest.

The iMedia Communications/Ponemon Institute survey found that ad agencies reported nearly 12.6 percent of their ad buys were designated behavioral targeted for 2005, but are expected to jump to over 20 percent next year.

When queried as to why some of the agencies were not using behavioral targeting, about one third reported that they, or their company, were concerned over privacy and data security. According to Dr. Larry Ponemon, "This finding is not surprising given that behavior-targeted advertising requires companies that use this technology to have strong data protection safeguards in-place to protect consumers."

The concern over privacy has received a great deal of media attention, with the recent spyware debate, cookie concerns, and the expected passage of HR29, the anti-spyware bill. Other concerns listed for not employing behavioral targeting included previous negative experiences (33 percent) and a lack of in-house expertise.

Over 63 percent of the iMedia agencies reported they were currently using behavioral targeting as part of their buys, and, of those who responded that they are not using behavioral targeting, over 58 percent of them indicated that they plan on employing it in the near future.

One of the other obstacles identified with implementing behavioral targeting was a lack of understanding and familiarity with the principals and techniques of BT. While 64 percent of clients were said to be familiar or very familiar with behavioral targeting, over 34 percent were not familiar with it at all. Clearly, behavioral targeting vendors have taken note of this fact as they have been concentrating on client/agency education extensively over the last few months, conducting seminars, conference presentations and white papers on the subject.

Behavioral targeting can be implemented in four different ways: through an individual publisher (a website), through an ad network (multiple sites), on your computer (adware), or via ad optimization (which delivers advertising that is enhanced as a consumer’s behavior is tracked on a particular site).

Over 90 percent of the agency respondents indicated that they are doing their behavioral targeting with individual publishers, although nearly half are also experimenting with ad networks.  About 30 percent of the agencies are using adware systems (which include a necessary software download) to deliver their messages. Just over 12 percent of respondents are doing ad optimization.

Interestingly, 88.5 percent of the respondents were well aware of the concept and idea of advertising optimization, despite the fact that few were actually employing the service.

The majority of agencies represented by the study indicated they are using a variety of different behavioral targeting providers, from publisher side vendors like Yahoo! (which had the highest usage indicator), Revenue Science and TACODA, to network providers like Advertising.com (highest usage indicator) and 24/7 Real Media. On the Adware/Behavioral Targeting front, Claria (highest usage indicator) and WhenU were mentioned as most used.

Fortunately for all of the behavioral targeting users, the iMedia/Ponemon Institute showed that nearly 83 percent of all agencies included in the survey were either satisfied or very satisfied with the results they’ve achieved by using behavioral targeting for their clients. Only 2.4 percent expressed disappointment with the results.

When probed further about privacy issues, the agency respondents indicated that it was unacceptable to collect personally identifiable information like name, address, telephone number or email addresses (74 percent). Additionally, over 83 percent indicated that it was unacceptable to gather information from emails and other documents that are stored on a consumer’s computer.

Despite those concerns, only about half of the agencies in the study indicated that their company will conduct investigations of behavioral targeting suppliers to ensure compliance with legal and privacy requirements. According to Dr. Ponemon, "This finding is somewhat disconcerting. It suggests that a large number of agencies that outsource behavioral targeting overlook privacy and data protection risks that can sorely impact consumers."

iMedia Communications, and its Market Intelligence team, are currently writing a comprehensive report on behavioral targeting that is planned for a mid-July release. Watch for its release via the iMedia Connection newsletter and this website in the coming days.

Neil Perry is iMedia's vice president of market intelligence.

Neil Perry is an entrepreneur, a co-founder of a video production company, an expert brand marketer, a successful seller, and an all-around "good guy"!  A longtime iMedia participant both on stage and off, Perry was instrumental in creating the...

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