Partnering with behavioral targeting companies increases clicks without alienating consumers.
Despite claims to the contrary, executives at adware companies know their industry faces big challenges -- including lawsuits alleging the violation of third party sites’ copyrights, proposed legislation banning or curbing adware and questionable transparency to the end user.
An even larger challenge for adware companies is how to cultivate a consistent consumer base that is attractive to advertisers. This challenge is reflected in two key issues:
Consumer Exhaustion: A basic principle of interactive advertising applies to adware companies -- success depends upon consumers viewing their ads. If consumers don’t, adware companies make less money and advertisers reach fewer customers. All adware providers face the same dilemma -- how to deliver ads on behalf of advertisers without exhausting consumers. Frequent pop-ups and pop-unders frustrate consumers, leading to frustration with the adware.
Churn: Frustration with the frequency of adware advertisements inevitably leads to consumers uninstalling or disabling the adware software. Most adware companies face enormous churn rates -- above 50 percent. With millions of customers uninstalling their software, adware companies must constantly chase new consumers to download their wares.
Facing legislation and the problems of customer frustration and churn, many adware companies are trying to formulate new ways to adapt to the current climate. We’ve begun referring to this adaptation and change as the next generation of adware.
Tapping behavioral targeting's mines
What will that next generation adware look like and how will it work?
Adware companies have an advantage in the interactive advertising space. Consumers have downloaded their software and have agreed to allow these companies to track their online behavior and activities. As a consequence, the adware companies are sitting on a gold mine of information. They have an extensive database of consumers’ specific online behavior that includes sites visited and the frequency of those visits.
However, adware providers have not figured out how to serve relevant ads based on that online behavior without alienating customers by serving ads too frequently or too intrusively
However, not all adware companies are tracking users’ behavior. Those companies that don’t track user behavior grapple with additional challenges such as figuring out how to charge maximum CPM rates for their ad space when they have little information about users.
Many adware providers have started looking at the recent interest in behavioral targeting of interactive advertising, and are considering how they can partner with a behavioral targeting company as a means to achieve their goals of serving more relevant ads to users without frustrating them.
Here’s an example showing how this next generation of adware would work. When a consumer visits a mortgage site, the adware company would let a behavioral targeting technology company tag the consumer anonymously as a user interested in mortgages. Two days later, when the consumer goes to a sports news site to check the score of a Yankees game, the behavioral targeting company -- working in cooperation with the news site -- would recognize the user and deliver a high CPM advertisement for a low mortgage rate within the ad space of the news site.
Who benefits?
Most importantly, consumers benefit. If an ad has no value to consumers, nothing else matters. They benefit by receiving ads relevant to them within the ad space of the sites they visit while enjoying peace of mind because the ads are based on anonymous profiles -- no personal identifiable information is correlated with those profiles. Moreover, consumers are not presented with additional intrusive pop-up or pop-under ads -- just with ads they would have seen anyhow when visiting a site and that are now relevant to their interests.
Publishers benefit from a higher return on their ad space. Their low-value ROS ad space is converted into lucrative property through the presentation of targeted ads to their sites’ visitors.
Adware companies benefit from a new revenue stream through the presentation of unlimited numbers of ads to their users within the ad space of the sites they visit.
The partnership between adware companies and behavioral targeting companies mends the adversarial relationship between adware companies and publishers. Publishers, frustrated with competition from adware companies -- which don’t share the publishing cost -- will now get higher returns on their advertising space and reduced competition for the attention of their readers.
As adware companies are forced to adapt to legislation and consumer preferences, this is an example of how we think the next generation of adware will work. What do you think?
Roy Shkedi is the founder and CEO of AlmondNet, Inc. Shkedi has 14 years of experience in inventing, developing and implementing interdisciplinary solutions and analyzing and investing in civilian and the defense companies. Prior to founding AlmondNet, Shkedi was the high tech analyst for Ofek Securities, Israel's largest portfolio manager.