Profiling Is Not the Answer
In the March 7 edition of The Wall Street Journal, DoubleClick CEO Kevin O'Connor made the argument that the future of the Internet depended on advertising. He continued to say that advertisers won't pay for online advertising if they can't be assured that their message will be delivered to a prequalified audience. And, he said that without advertising, the Web will not prosper. I agree that the Internet needs advertising. However, profiling a Web user is not the answer.
As e-commerce continues to explode, consumers are more aware of how online businesses use their information, and whether their privacy is being violated. According to a recent survey by Forrester Research, Cambridge, MA, 92 percent of consumers are "concerned," while 67 percent are "very concerned," about the misuse of their personal information online. As a result, online businesses are losing billions of dollars in potential online sales because of mistrust of how personal data is being collected.
On the surface, profiling appears an effective way to strengthen an advertising message. Profiling was designed to allow an Internet marketer to study the surfing habits of a large group of Web users and then place advertising in strategic spots to capture a more qualified audience. The theory is that profiling should result in better, targeted placement of an advertisement. In turn, profiling companies could charge their advertisers a premium rate.
That is the theory. What works in theory doesn't always work in practice. Profiling has been around for five years, with little success and many consequences. If profiling were doing its job, click-through ratios on ads would be increasing tenfold. Instead, they are declining at an abominable rate. Click-through rates have fallen to .36 percent, according to a March 2000 Nielsen//NetRatings report, while in 1998 the ratio was nearly 2 percent. Profiling does not work.
Why isn't profiling efficient? The simple reason is the Internet is a proactive medium. Its users are goal-oriented. When a Web user goes online to find information on hiking boots, he doesn't want to get barraged with ads for car insurance just because he had previously searched for information on insurance rates. The user likely sees the insurance ads as an intrusion while he searches for information on hiking boots.
A more effective, nonintrusive way to deliver a targeted audience is through contextual selling. Instead of trying to figure out a person's intention in advance and interrupting him with an ad, contextual selling aligns buying opportunities or branding efforts with the specific content of Web sites. For example, it places hiking boot ads, product images or text links on a hiking, camping or outdoor recreation Web site, thus capturing the enthusiast market. This strategy enables people and businesses to buy when their desire is highest -- when they interact with information and entertainment that interests them.
Contextual selling doesn't need to know a person's behavior on the Web. Therefore, it is not intrusive. Yet it offers online advertisers a proven delivery system for effective advertising. According to Forrester Research, contextual ads are six times more effective than banner ads. Why try to predict a Web user's action through profiling when you can count on human behavior?
Bob Pittman, president of America Online, agrees that database marketing techniques aren't the answer. In a recent New York Times article, he said, "We don't need to track people. If you want to sell cars, you talk to people when they are in the car area."
In order to preserve users' privacy on the Internet, profiling will require companies and advertisers to adhere to an unenforceable code of ethics. In the Federal Trade Commission's Privacy Online report to Congress, only 20 percent of randomly sampled Web sites complied with all four fair-information practices (notice, choice, access and security).
With contextual selling, consumers can remain anonymous while marketers get their targeted audiences. Effective online advertising doesn't need to be invasive; it just needs to be smart.