Washington takes aim at behavioral targeting

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

“We are troubled by the findings in this report which suggest the price of consumers' unfettered use of the Internet increasingly is [the] surrender of their personal information, preferences, and intimate details to the websites, data monitoring companies, marketers and other information-gathering firms that seek to track them online and develop digital dossiers or a range of marketers,” said US Reps. Ed. Markey (D-MA) and Joe Barton (R-TX) in a letter to 15 marketers mentioned in the newspaper. Markey and Barton are co-chairmen of the House Privacy Caucus. Markey and Barton then asked each of the 15 companies to detail the information they are collecting.

Fueling the growth of the industry are technology advances and a demonstrated boost in ROI. A Network Advertising Initiative study in March estimated that behaviorally targeted ads may cost more, but are twice as effective at generating sales as compared to non-targeted ads.

“What's different is the technical capability to collect information when the consumer is on the Internet has gotten easier and the interest that companies have in trying to cut through the clutter to get to consumers has grown,” says Jennifer Barrett, chief privacy officer of Acxiom.

Lawrence Whittle, CEO of M-Factor, says the ability to get information on prospects and campaigns in near real time is hard to resist. Combined with the new ability to tag that data with information beyond an IP address and also analyze it quickly, the speed is rewriting marketing playbooks.

“The ability to capture that information, analyze it and then use it is very, very hot,” he says.

Legislative timeline

Tracking behavior over time

Dec 7, 2009

FTC begins a series of workshops to discuss online privacy issues, including the collection and use of consumer data

May 2010

Two House members reveal draft legislation that would require consumer opt-in before any online data is gathered on them

July 19, 2010

Congressman Bobby Rush introduces an online privacy bill to the House Committee on Energy and Commerce

July 30, 2010

Wall Street Journal launches series on online privacy that heightens Congressional attention

October 2010

FTC is expected to issue recommendations on the use of online behavioral tracking and new consumer protections

The data that marketers now have access to allows them to build patterns combining psychographic, demographic, purchasing information and sometimes offline behavior as well, points out Forrester Research analyst Joanna O'Connell.  

“Today it is a wild diversity of opportunities that extend way beyond classic marketing,” she says.

At Capital One Financial Corp. the first sign of behavioral marketing is that two people entering the website for the first time might see different pages.

The “What's in your wallet” marketer has a variety of credit cards, some offering discounts, others offering miles or other benefits. Now, instead of everyone getting the exact same launch page, Capital One uses Nielsen's Prizm database and analytic software from Xplus 1 to essentially reconfigure its site in real time, choosing which of its credit card products to feature.

Pam Girardo, senior director of corporate communications at Capital One, says the software allows the company “to make an educated guess at what consumers would like. It helps us to prioritize what gets featured,” she says. While the technology prioritizes the first page, consumers don't actually get individualized offers and still have the choice of quickly switching to any of the other cards Capital One offers.

“It's not used for lending decisions, just optimizing the site experience,” she says.

Bluestem Brands, an e-commerce and direct marketing retailer that includes the Fingerhut and Gettington.com brands, has changed its marketing processes dramatically since the advent of behavioral targeting. One immediate sign is the brands' online ads.

Two years ago, a retargeted customer who bought a basketball might have received an ad from a broad sporting goods category. Now, the dynamically assembled ads are further tailored to a customer's interest within sporting goods, says Mark Redetzke, VP, e-commerce and digital marketing. Another sign is that a customer, who two years ago would get catalogs mailed to a home address, now gets a combination of electronic marketing and mailed catalogs.

Those changes pale in comparison to differences in how the company finds new customers. Where two years ago Bluestem would buy ads in ad networks based on broad categories, it now watches ad exchanges for potential customers using analytics from Xplus 1 that acquire the profiles fitting its target.

“We know the makeup of our customers who we want to acquire. We can use technology and systems to leverage that,” Redetzke says. “We have a third-party database that combines a variety of data sources, and [we] employ our own models to decide who we think looks like a favorable customer. We have five levels at which we target, and in milliseconds we can determine if they are top priority or third down the line.”

Another marketer, Publishers Clearing House (PCH), doesn't employ a lot of targeting in its own marketing — too many categories of people buy magazines. Instead, it employs targeting to deliver ads to consumers coming to its websites. The site's advertising content changes as consumers go through the site.

Josh Glantz, VP, general manager of PCH Online, says the idea is to make the site as interesting as possible to consumers when they visit. One way to do that is to offer personalized ads.

“We are a publisher of free content. It is imperative we monetize the content… that the content attracts a growing audience,” he says. “Not only must the content of our site be relevant, the advertising itself must be relevant.”

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