Washington takes aim at behavioral targeting

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Washington takes aim at behavioral targeting
Washington takes aim at behavioral targeting

Zappos jumped on a growing trend among online retailers last year and enabled its website to present product recommendations based on choices they make while perusing the site – and it seems to be working in the shoe merchant's favor.

“On-site recommendations create a more personal shopping experience which does lead to increased sales,” says Aaron Magness, Zappos, senior director of product marketing.

Beyond its site, Zappos has more recently begun experimenting with sending personalized ad banners in remarketing messages to customers who had previously visited the site. Each of the ads also includes a link for customers to turn off the personalized ads, in case a customer finds the messages annoying or intrusive.

“Early feedback is that most customers really like this kind of relevant advertising,” says Magness. “We see this as a big opportunity to allow the customer to cut through the clutter and focus on the types of things they're looking for,” he adds.

The refrain heard throughout the marketing industry is, “Behavioral targeting rewards the seller but also the customer.” Washington isn't so sure. The growing practice is under scrutiny.

New technology has given marketers the ability to target prospective customers in real time on the Web, based on data gleaned from the consumer's online behavior on their own sites, as well as data reported by firms that specialize in collecting these breadcrumbs across the Internet. Data firms can sell the information to interested marketers who then place targeted ads or reconfigure their sites accordingly. Depending on the analytics, those profiles can offer marketers suggestions for retargeting of additional purchases.

How much information do marketers possess?

Companies such as BlueKai and its competitors offer a broad view of the variety of consumer information available to marketers, because their tools gather data from multiple ad networks.

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As the business has grown – eMarketer analyst David Hallerman in February estimated that spending this year on ad targeting alone will be $1.125 billion, a 21.6% increase from 2009 – and mistakes have happened, criticism of the practice from lawmakers and consumer advocates has also grown.

Among the questions being raised in Washington: Do marketers have too much information? Do consumers know what is taking place? Can marketers be trusted to not track sensitive information?

Already there are signs that either Congress or the Federal Trade Commission (FTC) is about to change the game. In December 2009, the FTC began hosting a series of workshops on the issue of privacy online. In May of this year, draft legislation regarding consumers' rights in online behavioral tracking was introduced in the House. In July, Congressman Bobby Rush (D-IL) went further and introduced an online privacy bill to the House Committee on Energy and Commerce. It preceded a Senate committee hearing on the issue where representatives from Apple, AT&T and the FTC testified.

At the same time, online leaders like Google and Facebook began to face increasing scrutiny over their privacy policies and missteps. An automatic opt-in for Google Buzz, which concluded in September when it paid $8.5 million to settle a class-action suit, is just one example.

“The jig is up,” says Jeff Chester, executive director of the Center for Digital Democracy, a consumer group that has been urging Congress and the FTC to start requiring marketers to obtain opt-in consent before engaging in behavioral marketing. “Right now marketers are shooting themselves in the foot.”

Chester says consumers neither fully understand the information marketers are gathering nor are they comfortable with it.

This issue continues to be the subject of legal debate.  At least two lawsuits about unfair marketing using behavioral tracking have been filed.

A Wall Street Journal August series on the topic called “What They Know” fanned the flames of discussion on Capitol Hill and the FTC's chairman has suggested the agency might call for marketers to offer a “do not track” option when it releases its recommendations on the topic this fall.

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