One of the first pieces of analysis I did (when I was an analyst, that is) looked at the current state of online advertising. There was a good reason to do this: this was early 2002. We had just gotten through 2001, which was a terrible year, no matter how you look at it. Just about everything was down, including the market, the number of jobs in advertising, and just the general mood. I went searching for the current state of the marketplace with a strong desire to find something that would point to recovery and growth. I suppose I could more officially say that I had a hypothesis that the online advertising market was destined to bounce back. I just needed to find something that would be the catalyst.
What I found was targeting.
Targeting has always been a part of advertising. We have men's magazines and women's magazines, TV shows favored by kids, and radio stations primarily enjoyed by senior citizens. By focusing on content, we have always been able to find people.
The interactive medium, however, was a whole 'nother story. Not only could we target based on demographics and assumptions about who-likes-what, we could be far more elegant and more specific about the way in which we find and communicate with people. Plus, targeting seemed to offer the ultimate three-way win: advertisers got to reach just the people they wanted, publishers could sell their targeted inventory at a premium, and consumers got to see just the ads that were interesting to them.
In fact, this was really a four-way win because it brought a whole other category into the advertising mix, which were the technology providers who were able to crunch big data sets in clever ways and present fresh ad inventory for sale. Advertising was - at this point in time - set to become a massively efficient machine with a new set of companies thrown in. Targeting was what would pull us out of the slump. I had found my catalyst.
Sweet! I Was Right!
Well, I was sort of right. The thing that really reignited advertising back then was search. Search is a very simple form of targeting, where you're just serving an ad to a person making a request. Search is more of an offer than an ad, but that's a different subject.
It was, though, the beginning of a new wave of thinking about advertising, which is that we realized that we could place an intelligent machine on the other side of human behavior that would find just the right ad to serve up at the right time. The problem was we became drunk with targeting power, and there are some strong signs that we may have found the frontier of targeting - the real desires of the consumer are trumping the efficiency of the machine. We are turning upside down.
Three Problems With Targeting
Consumers are not comfortable with ad targeting. They may accept it, and they certainly take actions that show they appreciate it (e.g., clicking on a relevant ad), but when you ask them directly, and have them think about it, they don't like targeting. It worries them in three significant ways.
The Stray Puppy Problem
The ability to follow a consumer around the Internet has grown dramatically, in direct correlation with the increased reliance by advertisers on networks to drive up impressions. Increasingly, consumers are finding the same ad popping up on multiple sites, keyed to some behavior they have recently exhibited. It feels to the consumer that this ad has caught their scent and now won't leave them alone. This is a bit annoying, but generally easy to ignore.
The Gave-at-the-Office Problem
The problem with targeting is that the data provided to systems tends to be lagging indicators (e.g., data about past actions, as opposed to current actions). Search and contextual ads are immune to this problem, but many display ads suffer from this situation: The consumer has engaged in an action that suggests she is in the market for something and the targeting machine revs up. The consumer then makes the purchase, but the machine doesn't know about it. Therefore, the ads are being served to a ship that has already left the harbor. What was highly relevant even an hour ago is now hopelessly ignorable.
The SkyNet Problem
Consumer watchdog groups have latched on to targeting and love making lots of noise about it. As a handful of companies get larger and more engaged with the many touchpoints that consumers have with media, there is a real growing concern that these companies simply know too much and wield too much power. Companies like Apple, Microsoft, and Google are the prime targets of this concern, but many other players fall into this space as well.
Solution: Targeting for Retention
I'm going to remain optimistic about advertising. In fact, I'm going to even remain optimistic about targeting. I realize that there are a lot of people out there who are going to continue to push forward and exploit every bit of technology to get an ad in front of the right person, but there are always going to be the vanguards who will find a new way to use the tools to do better with consumers.
What these companies are going to do is turn their targeting tools inward and focus more on the ability to target people who are already engaged to provide them with a better experience, rather than simply trying to get more people to buy stuff. Targeting for retention is the next wave.
Consider this dataset focused on e-mail marketing. It ends up that people want behaviorally-targeted e-mails that are far more about customer service than about finding good deals. This is the exact sort of thinking that we need more of, and we need to apply it not just to e-mail but to all forms of direct consumer communication like Facebook and Twitter.
Then, I think I can start to think again that this technology will continue to drive growth for our business.
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Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.
March 19, 2014