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Perplexing ethical dilemmas of online marketing

Perplexing ethical dilemmas of online marketing Tom Hespos

Something is rotten in Denmark. That's the sentiment being conveyed by several of my acquaintances on the ad sales side when it comes to agency-side audience networks.

They understand they're getting insertion orders, or they're having more success moving inventory through ad exchanges. But they're left wondering whether the "data value drain" -- to coin a term -- is selling their publishing businesses short. That is, agency-side audience networks are leveraging the targeting data in which publishers have invested to target and segment audiences across the web. So, for instance, if a business website sells 30 million impressions against financial decision-makers, it suspects it may never see a buy like that from the same agency ever again. That agency will cookie those users, and if they pay the same site to reach them again, it will be at a $3 run-of-site CPM instead of a $25 premium CPM.

Moreover, the same data can be used to enrich other publishers. Continuing with my prior example, agencies with their own audience networks can leverage that same financial decision-maker data on ad exchanges, paying for inventory only when the agency's ad server recognizes a cookie it set during the original 30 million impression buy. An agency can help reach this user more efficiently, usually on a site completely different from the one on which the user was originally acquired. In this way, the targeting data that originated with one publisher can be used to purchase inventory with another publisher.

When we back up for a moment and look at the overall picture of the emergence of this agency-side business model, it raises serious ethical questions that every publisher, agency, and advertiser should be thinking about:

Question 1: Who owns data?
Publishers have invested serious money in ad servers and systems designed to target audiences on their websites by data points both observed and declared. It does not logically follow, however, that because these investments have been made by publishers, that they "own" data on their users exclusively. That's one of the big questions in my mind: Who owns data on users? We should consider all parties: publishers, agencies, and consumers themselves. We should also consider the possibility that no one owns data.

Question 2: Is it morally correct for agencies to be opaque with publishers and/or clients as to how they're leveraging data?
Putting aside the data ownership question for a moment, there's a serious question concerning how transparent agencies need to be when it concerns data. With publishers making promises to their users in the form of privacy policies, there are questions as to whether, in the course of merely identifying if a user belongs to a particular media target, they're violating their own privacy policies in allowing agencies to use that targeting data in subsequent initiatives. If the agency is likewise opaque to clients about how it obtains and uses data over time, advertisers can't value what they're getting from the agency with any degree of precision.

Question 3: Is it OK for agencies to both buy and sell inventory to the same advertiser?
It is difficult to defend the position that opacity with respect to inventory pricing doesn't present opportunities for agencies to "double dip" (collect fees from both inventory arbitrage and from service fees). There's that issue, plus the question posed by the arbitrage situation itself. What's the "acceptable" margin for ad inventory if an agency acts as both buyer and seller to an advertiser? Is that situation even morally permissible?

The agency-side audience development platforms have raised some interesting new ethical questions across the board, testing old lines as well as old business models. Those questions are relevant not only to our current discussions about ethics in online marketing, but also to much more urgent discussions concerning consumer privacy.

We all need to be thinking about these questions. And we need to think about it more deeply than simply drawing parallels to what happens in the traditional direct marketing business or by propping up imperfect analogies that don't apply in the digital world. The answers we develop to the privacy and transparency questions today are going to set precedents for the entire business. In other words, these are not questions to be taken lightly.

Tom Hespos is the chairman and president of Underscore Marketing and blogs at Hespos.com.

On Twitter? Follow Tom at @THespos1 or @_MarketingLLC. Follow iMedia Connection at @iMediaTweet.

Tom Hespos is President of New York agency Underscore Marketing. He is a frequent contributor to industry trade publications and has been writing a regular column about online marketing and advertising since March of 1998. His clients include Wyeth...

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