Category Archives: behavioral targeting

Why marketers know if you’ve been naughty or nice

santa watching

There is a story about a jolly old elf who tracks your behavioral data carefully, spies on you even when you’re sleeping, and runs algorithms to assess whether your actions are more positive or negative than social norms. Based on his calculation, the elf will reward you with financial gain in the form of material goods or will deduct from your status by tricking you with what looks like material goods but in reality turns out to be lumps of coal. The system is extensive, including a database of every youth in the world, and is updated annually. If you don’t like this surveillance, good luck: The elf’s privacy policy is unpublished, the observational data cannot be accessed by individuals, and your only recourse to correct misinformation is to send handwritten postal mail to the elf’s address at the North Pole.

Perhaps these childhood stories are why people often freak out about data. The legends of people recording others’ actions, especially those of children, as a form of behavioral modification have been with us for millennium. In Bavaria, the Santa myth is actually split into two figures, a Saint Nicholas who rewards good children with gifts and a devilish, horned Krampus who punishes bad children. Japan has a similar tradition, with an Namahage figure played by men wearing huge, ugly masks, who knock on doors and warn children not to misbehave. Religion is filled with data tracking, starting with God watching Adam and Eve’s naughty apple-biting in Eden, moving on to the widespread but vague idea that somehow all of your actions in your lifetime are being observed for a final post-death judgment. In our deepest beliefs, we perceive there is a connection between what we do, how others record it, and how we will be rewarded.

Which brings us to marketing surveillance 

If you collect enough data to form a baseline for comparing people, you end up with a “database” — and this idea has been around for at least 400 years.  In America in the 1600s, clergy tracked births, marriages and deaths; officials called “tythingmen” would also enter homes to inspect families for observed moral behavior. The first consumer database in the United States was set up in Massachusetts in 1629 to track property ownership. As data expanded, intrusions did too. In the early 1700s, U.S. postal mail was opened regularly to spy on message content.

And then marketers figured out they could make money from all of this information. Database marketing started in the 1940s, first driven by direct-mail marketers (who needed target lists of consumers to mail things to and then calculations to see what worked), later by credit-card companies and banks (who rapidly learned that not all consumers have the same credit risk), and then in the 1990s by Internet marketers who realized they could measure a treasure trove of consumers’ online behavior. While the basic approaches are the same — identify potential customers, differentiate by their value to you and what they need from you, continue to gather more information through interactions, and then customize your response — the cycle time of data marketing increased. Direct mail list updates used to take months; if you purchased a pair of boots at a store in December, it might be March before another company’s boot catalog showed up in your mail. But the Internet enabled a cycle time of identification, differentiation, interaction and customization within days, hours, and now even seconds. Visit zappos.com, look at shoes, don’t buy them, and you’ll see ads for similar shoes on other web sites within seconds. The prevalence of such digital “retargeting” has gotten so rapid that many consumers are beginning to freak out.

The systems are growing ever-more sophisticated. Digital media vendor Rocket Fuel has begun testing device fingerprinting to track consumers by their individual mobile phones; in a recent campaign for Brooks running shoes, it identified the mobile devices of everyone standing along the running route of the New York City marathon, and then later served ads to those devices for running equipment long after the crowds had dispersed to Baltimore, California or even foreign nations. Digital marketers can pick up the IP address of a home’s Wi-Fi connection, and then retarget multiple devices — based on a trigger of one person’s behavior — across the many iPhones, tablets and computers residing in a household. Creative-based retargeting is another digital approach in which banner ads or online videos can be retargeted based on a single ad appearing on any web page, whether or not a consumer clicks on it; for marketers, this provides the advantage of being able to “lift” a publisher’s audience, such as a reader of WSJ.com, and chase that individual around the web later with a pretty good idea of their demographic profile based on the original reading material.

Consumers are rebelling, so what is the balance?

Not everyone is happy about this. Early in 2014, a survey by Truste, a global data management company, found that 74% of Internet users had increasing worries about the use of online data. While only 38% expressed worry about government surveillance, 58% said they had concerns about business use of their personal information. Beyond simple consumer annoyance, the growing use of online data may actually be harming marketing results. 83% of survey respondents said they were less likely to click on an online ad due to privacy concerns. In a deeply ironic circle, the data collection sophistication used to make online marketing work better may actually be depressing response rates.

Smart marketers are recognizing this and beginning to tone down the creep-factor of retargeting, using tactics such as impression caps, dayparting, ad creative versioning, and opt-out options to allow Internet users more breathing room before they are inundated with braying offers.

Data tracking will not ago away, because it is how all of us assess the outside world to calibrate our actions. Marketing in particular is all about treating different customers differently, as the great Don Peppers once wrote — after all, if you have unique needs, you should receive messaging about products or ideas that appeal to your interests, and marketers who play this right will gain greater results from their advertising investments. Just as parents and Santa Claus watch over children to assess behavior, other people will always be watching you too. The practice isn’t creepy in and of itself; what has gotten scary is the instant cycle time it takes someone else to pass their judgment. For our clients, we recommend looking beyond just response and conversion rates to also assess the real end customer experience. You’re trying to share information that benefits the customer, so pace yourselves, people. Everyone likes an elf who brings presents, but we all get nervous if he’s watching us too much.

Using product ownership to slash online ad costs


Novices to online marketing are typically shocked that banner ad costs can swing in a 10-to-1 range, but that’s the modern Wild West of Internet media buying. About a year ago we were negotiating banner ad rates with The Wall Street Journal. The quotes were all over the place, north of $60 CPM in the initial round, down below $20 as we found other nooks and crannies in their pricing strata. And then, of course, with behavioral targeting, we reached identical prospects for $6 CPM or less.

The secret is simple: If you can find a way to reach the exact same audience directly, without paying the toll extracted by a major publisher, you can often free up 90% of the costs. (This issue has nuances; see Thomas Miskin’s excellent riff on why publisher context is sometimes more important than media costs.) Advertising networks are typically the best way to remove the toll; their collections of thousands of web sites can add cookie-based consumer tracking to pinpoint audiences that expensive, elite publications once owned.

OwnerIQ targets the man behind the mower

Now OwnerIQ provides a new spin on behavioral targeting. OwnerIQ is a consortium of advertising networks that uses observations of consumers who visit manufacturer pages indicating they own a product. Say, for instance, you boot up a web site with details on the owner manual for a Blu-ray device. Ping. It’s highly likely you own that gadget, so by tagging your computer, OwnerIQ can then serve future ads to you as you travel across the web — perhaps for a Bose sound system. OwnerIQ collates the data from three sources: relationships with about 30 major manufacturers; publisher partners that offer parts for specific products; and its own site, ManualsOnline.com — the type of content someone only reads when they have to work on something they own.

OwnerIQ claims in its case studies that response rates can be 50% higher or more than standard web banner CTRs. The cost structure is a fraction of niche marquee sites reaching the same audience. If you believe that past product purchases are a signal for future consumer behavior, OwnerIQ may be worth checking out.

Image: Idiolector

Rapleaf maps human relationships for offline sales


One of the coolest behavioral targeting trends we see is from emerging companies such as Rapleaf that map the connections or relationships between consumers. This is revolutionary ground, because companies can now predict what you might do based on what your closest human friends are doing.

Consider that a recent study by AT&T found that “network neighbors,” or people who communicate often with each other, are 5 times more likely to respond to the same marketing offer, and you see why marketers are intrigued.

Here’s one example of how Rapleaf enables this. Imagine you run an airline company and map data to realize that customer John Smith flies twice a year from New York City to Las Vegas. Now imagine you append information from Rapleaf, compiled from millions of online social interactions, and find out that John Smith has two college friends who live in Las Vegas. Putting two and two together, you could then send direct mail offers to John’s friends in Vegas offering them discount airfares to visit New York City — so they can fly to see their friend in reverse.

What’s interesting about this?

1. It shows the power of social media in mapping real human connections that can make offers more compelling to consumers.

2. It shows that social media is a data collection source — but the marketing implementation could be somewhere entirely else. If you can learn something about consumers by watching their behavior on Facebook or Twitter, the best sales approach may be with traditional offline marketing media.

3. It shows that people are watching you. Privacy guidelines aside, now with so much exposed online, for the first time the personal relationships and individual quirks are going into master prospect databases.

Photo: Josef Stuefer

How online publishers can stop ad revenue from crumbling


A day after the Associated Press practically accused Google of stealing its content, Google CEO Eric Schmidt stepped before the Newspaper Association of America to explain his vision for the future of journalism. Yes, advertising will still work, Eric predicted, but the internet will continue to break down some ad models that rely on scarcity, because on the internet everything is ubiquitous.

What, oh what, can online publishers do in this cruel new universe where marketers can target customers online without paying high prices to web publishers? Why, get clever. Here are four ways publishers can defend their ad pricing.

1. Decommoditize your readers. Yes, marketers will use technological tricks such as retargeting to serve ads to publishers’ readers without paying the publishers themselves. But publishers who add additional data about their readers could continue to charge high CPMs. Surveys, sign-up questionnaires, click-streams within a publishing network can all pinpoint audiences that are prime targets for marketers. Surely there is information inside the publishers’ walls that can add value to justify higher ad rates.

2. Contextualize your content. Bloomberg.com, for example, offers a stellar closed advertising system in which marketers can target banner ads to certain keywords in ad copy, or within site searches. Brands are willing to pay for context that makes sense.

3. Band together. We received an idea from the vice president of a national news magazine that certain online publishers could form a group to resist behavioral targeting, or at least compare data sets among their readers to add unique value to marketers. The groups could align like-minded news organizations, industry verticals, or even customer verticals. Imagine, for example, a series of publications that encouraged retargeting only within their content networks — perhaps even allowing noncompetitive advertisers to target each others’ similar audiences. An insurance company wanting to serve banners to affluent men could chase respondents to an expensive men’s watch brand, and vice versa.

4. Forecast results. Come on guys. We research media on behalf of marketing clients, and every time we ask an online publisher for forecasts on basic performance measures — click-through rates, conversions, traffic, sales — we get a dazed, hurt look. “Results? Um, we don’t discuss results…” Until your salespeople can tell us what advertisers will get by advertising on your web sites, we’ll be tempted to put the money elsewhere.

Some didn’t like our recent BusinessWeek column suggesting ad rates will plummet for marquee web sites. We say, don’t ignore the future. Dig deeper. Data cuts both ways, and if you play it right, you can charge for it. Hat tip to Miconian for inspiration.

Photo: Amanky

Direct mail spending is down. So could demand still be up?


A rocket scientist would look at this chart and deduce direct mail volumes are down significantly because banks are retrenching. EMarketer reports spending on postcards and the like will fall from $58.4 billion in 2007 to a projected $51.8 billion in 2009 — a whopping 11.3% decline within two years.

There is no question the collapse of lending hammered direct mail volumes. However, beneath this trend it is possible that improvements in targeting are reducing direct mail volumes while marketers continue to expand the channel. How? With stronger targeting and response rates.

A core metric of direct marketing is response rates: If you spend $250,000 to mail 1 million pieces and achieve a 1% response, you would get 10,000 respondents. However, say your marketing program gets more sophisticated and mails to a better list of people more likely interested in your service. Now, you spend only $125,000 on 500,000 pieces — but get a 2% response. You still end up with 10,000 responses.

The dark irony of direct response programs is that the better advertisers get at targeting, the smaller the total spending within the ad channel. This trend is now highly visible in online advertising, where behavioral targeted ad networks can sell inventory at a fraction of the CPM (cost per thousand impressions) of marque sites. If you need to spend $60 on WSJ.com to reach wealthy people but can do the same on an ad network that charges $4 CPM, your total spending in online ads will decline — and writ large, the industry as a whole may shrink. Media analysts need to look beyond just aggregate spending by advertisers to judge the interest within a media category; they must peek beneath the hood to see if better targeting is building demand while reducing total spend.

Behavioral targeting grows by slashing banner costs up to 93%


If you are looking for a customer, in the past you had to peer through a publisher’s window. A marketer trying to reach upscale men interested in finance, for example, would logically place ads in The Wall Street Journal. Marque publications and web sites controlled elite, special audiences, so the ads weren’t cheap.

Ah, but this model is changing, and the dark irony is web publishers may face the same threats that newspapers do today. New online tracking systems are beginning to connect the dots about everything you, as an individual, do online — and now they can serve ads by placing cookies on your computer, following you across thousands of web sites, and forgetting about the marque publishers that used to control niche audiences. OMMA predicts that by 2012 nearly one-quarter of all U.S. display ads will use behavioral targeting.

The trend is growing complex and war-like. ValueClick, for example, is one retargeting network with more than 13,000 web sites. Clients who place an invisible pixel inside a Flash banner ad can then place that ad on a marque site — for example, WSJ.com — to trigger ValueClick retargeting. When a consumer visits WSJ.com, they may not click on the banner ad, but the ad puts tracking onto that consumer’s computer — and then a series of subsequent ads can “chase” that individual consumer every time they enter the broader ValueClick network of other web sites.

Whoops, WSJ. The retargeted ads cost less.

This is delightful for advertisers because the retargeted impressions cost only a fraction of the original, expensive, marque site ad. Consider that some WSJ.com banner ads cost $60 or more for each 1,000 ad impressions; ValueClick’s retargeting costs less than $4 per 1,000 impressions against the same audience. If you are an advertiser, you just figured out how to reduce your costs by 93 percent. But how does The Wall Street Journal feel about an outside force identifying, and in a sense, lifting away its precious readers?

We’re researching these new trends, and how major online publishers might defend themselves, for a future national news column. If you have your own ideas, please share. The cost savings are obvious; the strain this will put on broader online publishing and ad revenue models is far more complex.

Photo: Simon Pais-Thomas

Secret to online targeting: Hello, neighbor


One of the great myths of online advertising is that publishers can accurately dissect the demographics of a given web site’s users. Quantcast uses cookies and comScore uses research panels, but all major online metrics companies monitor only a fraction of the millions of web sites that consumers actually consume. And even of sites they do measure — how do they know who you are, at the PC screen? Or if it is you or your spouse or kid or the dog somehow perched by the home office desk pawing at the keyboard?

David Honig suggests that the simplest way to improve online ad targeting may be to recognize the relationships between similar consumers. He wrote in OMMA Magazine that AT&T Labs Research and NYU ran a study in 2004 looking at response rates from telephone “network neighbors,” or people who communicate with each other frequently:

“If they found one network neighbor to have responded to a particular direct mail offer, then sending the same offer to his network neighbors resulted in a three- to fivefold lift above any targeting technique not informed by this network-neighbor data.”

OK, the study used phone networks and direct mail, but put the media formats aside for a moment. This is an amazing finding, if you think about it. These consumers had nothing else in common except that they communicated with each other regularly via the telephone; when direct mail hit them, they tended to act like a clone of their friendly counterpart. The researchers called this “homophily,” in which people attract friends with similar interests who like the same products or causes — and have the same Pavlovian responses.

Honig suggests this approach of mapping “neighbors” online for ad targeting may eventually replace demographic targeting; rather than pitching an ad for diapers to women ages 35-44 with children and HHI above $100k, you’ll serve the ad for diapers to friends of women who have recently bought diapers. Birds of a feather shop together.

Photo: Estherase

X-raying the behavior of people, not data


It’s both groovy and scary that MIT researcher Sandy Pentland has figured out how to track your chance of success in life with a cell phone. Think of behavioral targeting on steroids, and you get the idea.

Just as internet advertisers now use “data mining” and “click streams” to follow your online web visits to serve you targeted ads, the MIT idea is to use a cell phone to track your movements, social connections, and even the tone of your voice for “reality mining.” New cells phones can monitor GPS location, movement (with accelerometers), thus motion and body language, and tone of voice — things Forbes notes can determine the outcome of negotiations and purchase behavior. For example, MIT studies have found that evaluating the tone of a salesperson’s voice can predict outcome of a buyer saying yes with about 89% accuracy. Sandy notes, “Humans have a kind of second language that we’re not conscious of, a signaling language.”

In essence, this type of tracking will create a real org chart of humanity — who travels where, connects with whom, and communicates in a way most likely to make transactions or productivity or flu outbreaks happen. On the positive side, ad personalization and economic studies will be empowered. On the negative side, privacy will be a thing of the past.

(Photo: Meredith Farmer.)

Behavioral targeting: What you want, and what you don’t


Behavioral targeting is the advertising approach of monitoring a computer user’s behavior across dozens of web sites, and then serving up targeted ads in response. Read about finance, and you may soon see banner ads for insurance.

It works brilliantly, creating response rates up to five times higher than regular web site banner ads — but now we find consumers aren’t too happy about it. A new study by TRUSTe found that while only 40% of U.S. adults were familiar with the term “behavioral targeting,” most knew what it was — and didn’t like it. 91% said they would do anything to ensure better privacy online, and 42% said they would gladly opt out of all tracking even if it meant they never saw a relevant ad.

Behavioral targeting has been getting heat; the Center for Digital Democracy and the US Public Interest Research Group complained in November that the practice was “invasive” and caused “new threats” to children.

Which poses a conundrum. Consumers say they don’t like it, but consumers respond much better to targeted ads. It’s a bit like knowing chocolate is bad for us, but taking a bite anyway. There’s a difference between what people say and what they do.

Why ESPN knocked down Specific Media


There’s an interesting battle brewing online between big brands and ad networks, and it holds lessons in how to make online marketing work better.

ESPN.com this week said online ad network Specific Media could no longer sell ESPN banner ad inventory. The people who run major brand sites, such as Wenda Harris Millard over at Martha Stewart, explain in Mediaweek that this is about price … claiming online ad networks despoil the brands of premium sites by selling ad slots at cut-rate discounts.

What the big boys aren’t saying is that ad networks such as Specific Media, which are collections of hundreds or thousands of sites, threaten the big players because the advertising results from ad networks are often better. It’s pretty simple, really. Ad networks can track one user across multiple sites and chase them with personalized ads, based on extremely sophisticated demographic and behavioral targeting, while single web sites can’t.

This is the deep irony in internet marketing — that the biggest brands may make the lousiest advertising channels. Think of what the dynamic is within a WebMD, iVillage or ESPN.com:

Lots of different users, all with varied interests (ESPN has 197 different sports links from its home page navigation menus alone), all hitting one site. Your ad appears, and many of the users won’t be in the market. An ad network, by comparison, works like this:

Ad networks allow marketers to track a single individual across multiple web sites, track their past behavior or click stream, and then serve up personalized ads in response. We’ve seen clients with click-through rates on ads five times higher from ad networks than the same ads that appear on brand sites.

In the advertising world, it’s not the price of the ads that really matters — it’s the cold, hard results of what it costs to acquire consumers. We typically recommend that clients do A-B testing to run major sites and ad networks against each other. By all means, set up a horse race and include ESPN. But remember: you’re not buying a brand — you’re buying a customer.