Can Consumer Privacy and Targeting Coexist?

  |  October 7, 2004   |  Comments

The real consumer issue? Trust, not privacy.

Improved targeting is a key driver behind online advertising's recent growth, particularly growth in brand-driven advertising. Over the past three years, leading Web publishers such as Yahoo, Weather.com, USATODAY.com, and dozens of others have deployed sophisticated audience-targeting systems to optimize the inventory they sell to advertisers. Almost two-thirds of Online Publishers Association (OPA) members now offer behavioral and audience-centric targeting. These systems permit publishers to not only deliver more value to advertisers but also increase overall pricing as they make more efficient use of inventory.

Industry analysts, such as Gordon Hodge and Lloyd Walmsley of Thomas Weisel Partners and Youssef Squali of Jeffries, now predict Fortune 500 advertisers' demand for more sophisticated targeting will be a primary driver for increases in online media pricing and the shift of ad dollars from off- to online.

Nothing can slow this down, right? Or is this, as Yogi Berra once said, "dé;jà vu all over again?"

Earlier efforts in this sector were derailed by the elephant in the room: privacy.

Can privacy and targeting never coexist? Is it inevitable consumer privacy issues will derail publisher and advertiser efforts to improve the effectiveness and efficiency of online advertising through audience-centric targeting?

I think not. Here's why:

  • Interests will align. True targeting aligns the interests of publishers and advertisers. For effective targeting, advertisers and publishers must deliver ads people want. Consumers want and like relevant ads (numerous studies prove consumers respond more to ads they perceive as meeting their needs). Consumers neither want nor like irrelevant ads. More relevant ads are most likely to generate consumer reaction (in one Belo case, a lift of 2,500 percent). This means more value for advertisers and higher prices for publishers. Relevance will align interests.

  • Consumer marketers don't need personally identifiable information (PII). Consumer marketing isn't like selling million-dollar enterprise software systems. To be effective, you don't need PII about the target audience. Segmenting and targeting audience members into broad categories, such as job seekers, healthy cooks, or outdoor enthusiasts, is enough to dramatically improve ad relevance. You don't need PII such as name, address, phone number, even email. There's no need to know who they actually are.

  • Trust will rule the day. The real consumer issue is trust, not privacy. Historically, consumers are happy to share personal information with dozens of organizations that deliver value to them, so long as they trust them. Communities are full of century-old institutions that built trusted relationships with consumers: banks, telephone companies, newspapers, and the post office. These institutions use plenty of private information to deliver services to consumers.

    When that information is abused, such as telemarketers using publicly available phone numbers, consumer trust is broken. That's why there's the Do Not Call Registry. Publishers and purveyors of applications that abuse targeting will lose consumer trust and suffer. Those who add value and build trust will succeed.

  • Consumers will lead. If targeting delivers the right value, consumers will embrace it. They're smarter than we credit them for. They know what they want and are good at finding it. They also know what they don't want and are good at avoiding it. They'll flock to Web sites that are clean and relevant and provide better commercial information -- just look at Google. They'll avoid sites that are cluttered with lots of loud, irrelevant ads and little personal relevance. Consider the dozens of defunct dot-com-era portals.

  • Technology will stay out of the way. This isn't a technology issue. There's no lack of technology available to help protect consumer privacy. We've seen companies offer "user-mediated privacy applications." Microsoft gave us Passport and cookie controls in Internet Explorer. We had PrivaSeek and the Liberty Alliance. Real Media, now 24/7 Real Media, created the Privacy Proxy. We don't lack technology. As the industry matures, we're learning business issues, not technology issues, will drive the future.

Privacy issues will be successfully addressed and eventually go away, but probably not before a few folks get burned for ignoring the issues listed above. I'm sure we'll see more tech-centric companies offer more tech-centric solutions to help consumers protect privacy. They'll either claim to be a trusted "Switzerland," as many others have, or deliver some new technological marvel to divine true consumer interest.

They'll capture our attention for a few moments, as their predecessors did, then vanish. It always works that way. The only answer is to use trust to win consumers' hearts, minds, and wallets. That will win the day.

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ABOUT THE AUTHOR

Dave Morgan Dave Morgan founded TACODA Systems in July 2001 and serves as its CEO. TACODA is a pioneer and leading provider of behavioral-targeted online advertising solutions for driving quality branding relationships. TACODA delivers advertisers high quality, targeted audiences from premium sites, powering successful online advertising campaigns. TACODA-enabled Web sites, which number over 2,000, reach over 70 percent of the U.S. Internet audience monthly. Its roster of customers, mostly Fortune 1000 business, includes branded national, regional and vertical sites, and 75 percent of the top 20 U.S. newspaper companies. Customers include the New York Times Digital, Weather.com, iVillage, Gannett/USATODAY.com, The Tribune Company, Belo Interactive, BusinessWeek.com, About.com, Advance Publications' Advance Internet and Forbes.com. Virtually every top 50 online marketer has run campaigns on TACODA-enabled sites, including travel, automotive, packaged goods, consumer/health products and consumer electronics companies.

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