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The Evolution of Behaviorial Targeting

The Evolution of Behaviorial Targeting Rob Graham

Behavioral Targeting (BT) offers benefits to both advertisers and consumers. Ads that use BT technologies continually measure higher effectiveness and have now become part of any rational online campaign strategy.

As the New Year gets underway, it's becoming more and more apparent that BT is on the minds of online advertisers. The general verdict is that BT-enabled online advertising works a lot better than standard ad placement, and it's a huge step forward in the quest to get the right message to the right person at the right time.

It's important to examine the state of BT and what is needed to keep its growth moving forward.

The topics we'll be covering include:

Understanding BT Benefits
Defining Privacy
Giving Consumers More Control
Overcoming Consumer Data Obstacles
BT's Development
Where BT is Heading

Author Notes:
A frequent contributor to iMedia Connection, Rob Graham has been an interactive communications and marketing specialist in the areas of production, training and marketing since 1990.

As an adjunct professor at University of Massachusetts at Lowell and Harvard University, Rob covers informational and design technologies in his classes. He is also the Director of LearningCraft, a marketing training company that offers instruction and training programs for brand managers, agency teams and direct marketers looking to achieve maximum ROI using Rich Media and Behavioral Marketing technologies.

Rob is the author of Advertising Interactively, a behavioral guide for creating effective interactive online ads, and has been a marketing and technology columnist covering Rich Media and Behavioral Marketing for more than five years. He lives with his family in New Hampshire.

During the past few years, BT has become less of a “what” and more of a “how.” BT vendors employ different approaches to gain an understanding of the demographics, intentions, desires and habits of people who visit their client websites.

The issue today isn’t necessarily how individual consumer data is being collected, but how marketers are using it. While consumers aren’t taking to the streets to protest against being observed and tracked while surfing, miscomprehension of BT as spyware may lead to advanced legislation that ends up throwing the baby out with the bathwater.

Take, for example, H.R. 3402, a bill that President Bush signed into law on January 5 of this year. While designed to be a guard against stalking behaviors and violence against women online, the wording of part of the law states that it is in place to “prohibit anyone from using the internet without disclosing his identity and with intent to annoy.” Keeping in mind that annoyance is in the mind of the beholder, it’s possible to imagine some individuals feeling annoyed by unsolicited ads or BT profiling , and these people might start generating lawsuits to express that annoyance.

For consumers to assess value in anything, the perceived benefit must far outweigh the perceived threat. While the benefit of BT is readily apparent to vendors, selling consumers on the advantages of being better targeted is a bit underwhelming. “Let me see if I have this straight,” they muse. “If I let you watch my behavior online you’ll send me ads?”

It’s kind of like running a sweepstakes in which the grand prize is a free prostate exam. While the prize has value, it’s not much of a motivator to get you to reach for your wallet.

To be truly effective, the benefit BT brings to consumers has to be more direct and more obvious.

Recent independent studies have pointed out that BT-tagged ads have a higher response rate. However, is the promise of better targeted messaging enough to make consumers agree that their online surfing behaviors need to be monitored? Is the consumer in control of this relationship, or is it still a model where the vendor will decide what’s best for the consumer? Where is the line drawn between benefit and invasiveness for consumers?

Not surprisingly it depends on the consumer and it depends how you define privacy.

Imagine you’re in a busy mall one afternoon and you happen to take a seat on a bench. As you sit there, shoppers stream past you in both directions as they complete errands, take advantage of great deals or just meander.

From your vantage point you’re privy to a wide spectrum of information about these shoppers. For example, with few errors, you can probably accurately identify the gender of each person who walks by. You can probably also make a solid guess about the age range each person falls into. Perhaps you can even get a sense of the level of sophistication or earning power of each shopper by looking for cues such as quality of clothing, grooming or even the branded shopping bags they carry.

Levels of intent and relevance can be measured by watching which stores they enter and how long they stay. You may even be able to get a sense of which shoppers are enjoying the process and which ones would rather be elsewhere.

In short, you’re privy to an abundance of information that would be a gold mine to marketers if they could only figure out a way to corral the different shoppers into distinct groups and then reach them with offers.

Most BT employs a similar technique to gain and understand who site visitors are, which messages are most relevant and which consumers are apt to spend the most money as a result of this information exchange. However, does this observation of consumers mean an open assault on their individual privacies?

Privacy is a hard thing to define. My being able to observe you walking through a mall and identifying you as a white, female between the ages of 30 and 40 could be considered an invasion of your privacy.

Most rational people would never consider this level of observation to be a threat.

But what if I got up and started following you around the mall to observe your behaviors as a shopper? At what point does my observing cross the line from harmless to just plain creepy?

The answer depends on the consumer’s perception of the threat. While following somebody around with a clipboard and taking notes might seem a little excessive, the threat could become opportunity if I were to offer that shopper money saving coupons based on that observation.

For many BT companies the most common approach is to observe web visitors from a distance. NextStage Global Chief Research Officer Joseph Carrabis says, “we are able to ‘profile’ an individual without ever actually identifying that individual. No cookies are used, thus no tracking of a person’s movement about the internet is required or even encouraged. We are describing the type of people visiting a site and identifying their motivations for the actions they take.”

Even with this level of non-invasive profiling consumers often bristle at the idea of anybody knowing anything about them without their permission. For many BT vendors this is a point that needs to be recognized and addressed going forward.

Dave Morgan, CEO, TACODA, says, “What’s most important is not to make the mistakes we saw in the late 1990s. In Tacoda’s advertising network, we only target ads with anonymous, non-personal information. We permit consumers to opt out of our targeting. We realize that consumers, not Tacoda, own their data.”

While the benefits of directing relevant advertising to the people who can most use it and want it seems self-evident to marketers, the battle behind how that information is collected has become fodder for privacy advocates. Good or bad, right or wrong, consumers want to know who’s watching them and how that that data is being used.

Claria CMO Scott Eagle thinks the best approach is to involve the consumer in the decision making process. “Tell the consumer what you’re doing; get permission, and let them be in control.”

WhenU’s CEO Bill Day concurs. “The value of targeted marketing MUST be totally apparent to consumers in the form of an improved experience. If we observe a customer looking for a new model of digital camera we can notify that customer in a clearly branded pop-up window that the same camera is available elsewhere at a great savings. The customer instantly and intuitively grasps the benefit.”

On a recent trip to the supermarket, I finished my transaction by handing the cashier my supermarket rewards card. She passed it over the scanner and in a flash $32 dollars was subtracted from the total for my groceries. At the same time a record of my purchases was captured to the store’s database and will be mined for information that can be sold back to vendors.

As a consumer the benefit to me is readily apparent and very immediate. While this record of my purchase reveals some of my buying habits, it is also information that I don’t really care about sharing. I just saved $32 dollars in exchange for my willingness to let retailers take a peek at what I’m buying. If this data allows vendors to conclude that my purchase of several cans of rich and meaty dog food means I have a dog (or have fallen on very hard times) then good for them. I do have a dog and I don’t try to keep it a secret. Because I shared this information it’s very possible that the next time I visit the supermarket I will receive a discount coupon for dog food. I save more money and my dog continues to eat.

As a consumer, I see the value of using a supermarket rewards card, and it seems like a fair trade. It’s also a model that many consumers are familiar with from years of television advertising. Whether we like the commercials we see or not, we understand that the financial value of the commercials that pays for the program we’re watching.

These models are very clear cut when it comes to my trading time or information for something I want in return. For most BT vendors this is also the ultimate goal. By targeting consumers they can provide advertising that is relevant and of some value. The alternative is the cornucopia of contextual placement ads that are hoping to get lucky by accidentally bumping into the right consumer. With BT the connection advertisers make with consumers is consistently more relevant and the odds of them buying advertised goods are also greater.

Many BT vendors agree that giving the consumer more control is a necessary part of online advertising’s future. For many years the relationship between most advertisers and consumers has followed a modified predator/prey model, and consumers have had little control over the placement or type of ads they see. By giving consumers power to control their online advertising experience, advertisers may find that they are able to start a more profound dialogue with those consumers.

But apart from access to control, consumers need value.

Stephen DiMarco, vice president of marketing and client services for Compete.com points out that "differentiation will occur based on two factors which are the ability to create repeated, real value for consumers and the ability to outperform marketer’s existing marketing programs. Companies who can do both well will have more demand than then can fill."

One of the major hurdles facing BT vendors today is getting accurate data about consumers and their behaviors. Horror stories regarding malware and spyware wreaking havoc on the masses have led many consumers to conclude that any online technology that seems to be spying, even if there is a beneficial aspect to it, is wrong and dangerous.

For a number of vendors, especially those who rely on cookie placement to identify users, this approach to data collection looks a bit shaky. Some, like Ali Mirian who handles publisher solutions for 24/7 Real Media, are doing what they can to educate consumer on the benefits of tags that can be used to provide service. Mirian says, “We approach it on two fronts-- by continually addressing the public with educational articles about such things as cookies and interactive marketing in general, and by addressing it at the industry level."

No single corporation can move the needle enough when it comes to public perception. We all have to converge and speak with a common message. We also need to engage anti-spyware vendors, some of who are mischaracterizing and exaggerating the threats posed by cookies.” 24/7 New Media is also working with organizations like the Network Advertising Initiative (NAI), of which it is a founding and active member, to get the word out.

But is this a message that consumers are interested in? Is the benefit of being able to be tagged and tracked by marketing vendors clear and important to consumers? It would appear that in spite of consumer education the trend away from cookies is getting stronger and more appealing.

For a personal example, I recently installed anti-spyware on my system after being knocked around by a few Trojans. I now get an hourly update on the number of cookies found in my system, and then they all magically vanish. Although I understand that some of those cookies contain settings and properties information, the ongoing destruction of these cookies doesn’t raise my ire.

Even as an enlightened consumer and fan of what BT can offer me, the task of trying to figure out how to configure my software to allow certain cookies to take roost while avoiding others isn’t something I’m going to pencil into my day planner. Right now I’m protected against the bad guys.

For consumers to take advantage of the opportunities that BT can offer there has to be a clear cut path leading to those benefits. They need to be benefits that take little effort to achieve. Whether too busy or too lazy, people will often not even take the extra step needed to accomplish something that offers a direct reward. This is evidenced in the shockingly low rate of conversion -- 60 percent -- for manufacture rebate coupons as recently reported by Business Week.

Tim Vanderhook, CEO of SpecificMEDIA, thinks that it’s effectiveness that will be responsible for BT’s growth in the near future. He predicts, “As more studies come out that support behavioral targeting as an effective way to reach an audience, we will start to answer the question of what is an effective frequency for a great product category and what behaviors should we be targeting for each advertiser.”

Most BT vendors agree that being able to spot really relevant links between advertisers and consumers is paramount to effectiveness and future success. Future effectiveness is going to rely more and more upon contextual relevance based on realistic patterns of consumer behavior. For example, if I’m tracked visiting an automotive website a single time it doesn’t necessarily mean I’m looking for a new car. However, if over time my search patterns reveal that I’m visiting a number of car sites or visiting the same site multiple times, then the odds that I’m looking for a new car increase.

BT vendors also need to approach the relationship with consumers with a level of finesse. While tracking a consumer can indicate intention or interest, consumers are still wary of unsolicited messaging no matter how topical. Many future marketers will need to learn how to inform consumers about behaviorally targeted offers without seeming like spies or by making the relationship seem forced.

There is also increased interest in getting a more complete picture of the consumer by drawing data from channels other than just online. Just as a chain is only as strong as its weakest link, the ability of a network to gain an accurate profile of site visitors is only going to be as effective as the data being collected. Because many home computers are used by more than one person, the accuracy wanes even further.

Getting a complete picture of a consumer’s actions may mean linking online behaviors with offline behaviors including television, radio and wireless. While the strategies for accomplishing this task are still being developed, changing technology is starting to drive all media toward the digital domain.

Once radio, television, online and wireless are all being made from the same digital ingredients, the ability to track behaviors across media increases dramatically. Marla Schimke, director of marketing at Revenue Science, agrees. “We’ve been very vocal about the fact that media is converging on internet protocol regardless of device. This enables behavioral targeting across different channels and makes it even more essential to the industry because behavioral targeting will be necessary to aggregate audiences across those devices.”

Nada Stirratt, Advertising.com’s senior vice president and general manager of advertising sales, cautions that “cross-channel behavioral tracking will continue to evolve relatively slowly so that it doesn’t exceed the level of acceptance by consumers. Although technology for wireless tracking may be available in the short term, we don’t see acceptance of this practice for behavioral targeting in the near future-- the mobile device is still too personal to the consumer.”

Most of the vendors I spoke with agreed that tracking behaviors across media channels is an idea whose time is yet to come. For Bill Day at WhenU, the real restrictions are based on privacy issues. “Our privacy protective technology is certainly transferable to other platforms beyond the computer desktop, but tracking people across platforms multiplies the potential for non-personally identifiable data to be connected to personally identifiable data. We will only do cross platform when we are assured these issues can be solved.”

A key part of the advantages that media integration may offer vendors and consumers is its ability to provide a truly personalized marketing experience.

For Claria’s Scott Eagle that’s the next big step. He says, “The internet has evolved from its inception from the creation of a common network, to ease-of-use via high speed access to an explosion in the amount of internet content available, giving consumers unparalleled access to an almost unlimited source of news and information. Consumers now need a better way other than searching for content to capitalize on this empowerment. This need is opening up the next stage in the evolution -- a smarter internet -- one that automatically and dynamically analyzes the available content on the web to identify and proactively deliver just what each unique consumer is interested in.”

Marla Schimke at Revenue Science feels that use of the data collected by vendors will need to address bottlenecks in order to be used to reach targeted consumers. “We don’t see an area where there will not be growth, but the high demand categories when premium contextual inventory sells out -- financial, automotive, et cetera -- will continue to be the strongest.” She adds, “Sites like MySpace.com and other user-generated content sites will see an explosion of behavioral targeting in 2006 because simple place-based buying is not as effective as more and more consumers join these sites. Advertisers are desperate to reach consumers on these sites.”

Most of the vendors I spoke with agree on one thing-- during the next few years BT will become ubiquitous with online advertising. The very nature of the web as a place in which to have two-way conversations with consumers will drive forward the advantages of identifying the people that you want to sell to. As 24/7 Real Media’s Ali Mirian puts it "We are already seeing advertisers focus on the audience they are trying to reach, rather than wanting to 'buy BT.’"

Stephen DiMarco at Compete.com adds, “The term ‘behavioral targeting’ is often being used to describe what should more accurately be considered ‘contextual marketing.’ In the future the term ‘behavioral targeting’ will be reserved for companies who can target consumers based on true consumer profiles versus simple page-, domain- or category-based targeting rules.”

As BT gains momentum, it would seem that a famous quip attributed to John Wannamaker from more than 140 years ago -- “Half the money I spend on advertising is wasted; the trouble is I don’t know which half” -- may soon become an antiquated notion.

Rob is the Founder and Director of Training at LearningCraft, a company which develops training programs related to the areas of business communications and online marketing. Curriculum areas include Multimedia application development, Search Engine...

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