Privacy on the Web is a constant issue for public discussion—and Congress is always considering more regulations on the use of information about people’s habits, interests or preferences on the Internet. Unfortunately, these discussions lead to many misconceptions. Here are 10 of the most important:

1) Privacy is free. Many privacy advocates believe it is a free lunch—that is, consumers can obtain more privacy without giving up anything. Not so. There is a strong trade-off between privacy and information: The more privacy consumers have, the less information is available for use in the economy. Since information helps markets work better, the cost of privacy is less efficient markets.

2) If there are costs of privacy, they are borne by companies. Many who do admit that privacy regulations restricting the use of information about consumers have costs believe they are born entirely by firms. Yet consumers get tremendous benefits from the use of information.

Think of all the free stuff on the Web: newspapers, search engines, stock prices, sports scores, maps and much more. Google alone lists more than 50 free services—all ultimately funded by targeted advertising based on the use of information. If revenues from advertising are reduced or if costs increase, then fewer such services will be provided.

3) If consumers have less control over information, then firms must gain and consumers must lose. When firms have better information, they can target advertising better to consumers—who thereby get better and more useful information more quickly. Likewise, when information is used for other purposes—for example, in credit rating—then the cost of credit for all consumers will decrease.

4) Information use is “all or nothing.” Many say that firms such as Google will continue to provide services even if their use of information is curtailed. This is sometimes true, but the services will be lower-quality and less valuable to consumers as information use is more restricted.

For example, search engines can better target searches if they know what searchers are looking for. (Google’s “Did you mean . . .” to correct typos is a familiar example.) Keeping a past history of searches provides exactly this information. Shorter retained search histories mean less effective targeting.

5) If consumers have less privacy, then someone will know things about them that they may want to keep secret. Most information is used anonymously. To the extent that things are “known” about consumers, they are known by computers. This notion is counterintuitive; we are not used to the concept that something can be known and at the same time no person knows it. But this is true of much online information.

6) Information can be used for price discrimination (differential pricing), which will harm consumers. For example, it might be possible to use a history of past purchases to tell which consumers might place a higher value on a particular good. The welfare implications of discriminatory pricing in general are ambiguous. But if price discrimination makes it possible for firms to provide goods and services that would otherwise not be available (which is common for virtual goods and services such as software, including cell phone apps) then consumers unambiguously benefit.

7) If consumers knew how information about them was being used, they would be irate. When something (such as tainted food) actually harms consumers, they learn about the sources of the harm. But in spite of warnings by privacy advocates, consumers don’t bother to learn about information use on the Web precisely because there is no harm from the way it is used.

8 ) Increasing privacy leads to greater safety and less risk. The opposite is true. Firms can use information to verify identity and reduce Internet crime and identity theft. Think of being called by a credit-card provider and asked a series of questions when using your card in an unfamiliar location, such as on a vacation. If this information is not available, then less verification can occur and risk may actually increase.

9) Restricting the use of information (such as by mandating consumer “opt-in”) will benefit consumers. In fact, since the use of information is generally benign and valuable, policies that lead to less information being used are generally harmful.

10) Targeted advertising leads people to buy stuff they don’t want or need. This belief is inconsistent with the basis of a market economy. A market economy exists because buyers and sellers both benefit from voluntary transactions. If this were not true, then a planned economy would be more efficient—and we have all seen how that works.

Read More: WSJ.com (Entire Article Here)

Facebook Ad Network – Is It Coming?

On August 27, Mashable reported Facebook has a $33.7 billion valuation – wow. Too high? Maybe to some, and maybe not to others. Instead of debating that point, let’s look at some things that Facebook might do in the future to a) serve advertisements and b) make more money.

Facebook has some pretty amazing things going for it. It’s becoming ubiquitous in terms of its appeal, so all walks of life are flocking to it. Second, people spend tons of time on Facebook and visit it on their computers and phones every day – if not more. Third, with its massive loyal user base, no matter what your niche audience looks like chances are you can effectively target them and reach them in large numbers on Facebook. Finally, user growth is still expanding and has a long way to go before peaking.

What does this mean for online marketers and media buyers? Well, consider these two factors: unprecedented targeting to a massive audience and the possibility of a new ad network layered over the social graph already installed on millions of sites. (You know all those Like and Share buttons, Facebook Connect, and fan widgets?) In many ways, these sites are already connected to Facebook on code/technical levels.

Let’s explore these two things with the disclaimer that a lot of what I outline here is based on predictions on what Facebook could do – not necessarily on what it will do.

Read More: ClickZ

The shoes that Julie Matlin recently saw on Zappos.com were kind of cute, or so she thought. But Ms. Matlin wasn’t ready to buy and left the site.

Then the shoes started to follow her everywhere she went online. An ad for those very shoes showed up on the blog TechCrunch. It popped up again on several other blogs and on Twitpic. It was as if Zappos had unleashed a persistent salesman who wouldn’t take no for an answer.

“For days or weeks, every site I went to seemed to be showing me ads for those shoes,” said Ms. Matlin, a mother of two from Montreal. “It is a pretty clever marketing tool. But it’s a little creepy, especially if you don’t know what’s going on.”

People have grown accustomed to being tracked online and shown ads for categories of products they have shown interest in, be it tennis or bank loans.

Increasingly, however, the ads tailored to them are for specific products that they have perused online. While the technique, which the ad industry calls personalized retargeting or remarketing, is not new, it is becoming more pervasive as companies like Google and Microsoft have entered the field. And retargeting has reached a level of precision that is leaving consumers with the palpable feeling that they are being watched as they roam the virtual aisles of online stores.

Read More: NYTimes.com

Integrated DR Marketing for Multi-Channel Retailers

Since the launch of AdWords in 2000, Google has worked with advertisers and their agencies to increase brand and product awareness — and to drive sales — by helping advertisers reach the right person, in the right place, at the right time, through the effective use of search advertising. The success of this tactic has generally been measured by connecting search advertising campaigns to revenue within the e-commerce domain.

As consumers have become accustomed to a multi-channel world, however, it has become important to look outside the “e-commerce box” to measure search campaign success. The goal in doing so is to find the correlation between search advertising and overall company sales, both online and offline, as customers are present in both places.

In recent times, a growing number of our customers have asked us and their agencies how they should approach the concept of quantifying online’s impact on in-store sales. We recently thought through the concept with Razorfish and came up with a joint POV; you can find that on the Razorfish site, here.

Read More: GoogleRetail.Blogspot.com

Video ad network BrightRoll has struck a deal with search data provider Magnetic to offer search retargeting as an option for targeting video ads. Search retargeting allows advertisers to run display ads based on a user’s search history. So if someone has been researching a car purchase, they might see a banner ad from an auto advertiser.  With the BrightRoll deal, Magnetic is now applying this approach to video ads as well. “By combining Magnetic’s targeting technology with our video advertising platform, we’re able to solve the needs of our advertisers by delivering targeted campaigns at scale with a high return on investment,” said BrightRoll CEO Tod Sacerdoti in a statement. The ad network already offers targeting according to demographic, behavioral, geographic and other criteria.  Magnetic has already struck partnerships earlier this year with display ad networks including interCLICK and Undertone Networks aimed at refining display ad targeting based on the 270 million anonymous profiles the company has created based on search data gleaned from mostly second-tier search engines, Web site toolbars, e-commerce sites and other sources.  The idea is to combine the high conversion rates of search advertising with the traditional brand-building role of display. “You have all the different creative options in display that you don’t have in search,” said Magnetic CEO Josh Shatkin-Margolis. “And for premium publishers the best form of online display ads are video ads.”

Read More: MediaPost

The Future of Free Media

Monday’s Wall Street Journal article on cookie tracking was a bit underwhelming. So although (a) we’ve been having the same conversation over and over again since 1996 without getting anywhere*, (b) the article was a bit misleading and maddeningly vague, and (c) industry rumor has it that the church/state divide at the Journal does not quite live up to the J-school ideal, I am siding with Jeff Jarvis in believing that News Corp is not well enough organized to stage a conspiracy: the article was just poorly done.  These arguments are nominally about privacy. And providing privacy is a worthy but complicated** goal. But given the general level of philosophical confusion about privacy, I believe much of the commentary (and the comments to the commentary) is motivated by a hostility to advertising in general.  If you hate advertising, you hate advertising. Arguing that not paying for music means a diminished supply of quality music does not sway the downloader. Not paying for media–in whatever sense of pay–means a diminished supply of quality media. This argument does not sway the hater of advertising, but I’m not trying to convince them. Advertising provides something important: free (as in beer) media. This may not mean much to Rupert Murdoch–who can afford to pay cash for his media–but it means something to society. And it should mean something to those of us who are trying to find a way to make quality ad-supported online media a viable proposition.  Paying cash for media is regressive. High cover prices exclude those with less disposable income. (This strategy is used purposefully by mixed-model high-end media outlets to produce a demographic appealling to better-paying advertisers.) Advertising democratizes media***. And media allows a democracy.

Read More: ReactionWheel.Blogspot.com

The Google-Verizon Net Neutrality Pact

Google CEO Eric Schmidt and Verizon CEO Ivan Seidenberg hosted a conference call Monday to discuss an open Internet just days after the Federal Communications Commission abandoned efforts to reach a compromise. The proposal aims to derail unlawful discriminatory practices and gives regulators the authority to stop offenders.  While the two companies published the terms of the Google-Verizon “A Joint Policy for an Open Internet” agreement in a blog post, the plan does not treat wireless and wireline network access equally.  Both Schmidt and Seidenberg emphasized that there is no formal agreement based on the proposal. It simply represents suggestions to “the public policy arena to see how we can move our industry forward,” says Seidenberg, emphasizing that the agreement stands for innovation.

Read More: MediaPost

IAB Ad Network Guidelines: Providing Greater Brand Safety

We have all witnessed the ad network space and the overall non-reserved inventory landscape become increasingly complex. During the past 18 months, changes to our industry have come from the continued proliferation of ad networks, growth in data usage, the emergence of exchange models, as well as increased technology offerings including demand-side and supply-side solutions.  While these innovations are designed to benefit the end client, it has led to confusion – particularly during a time when advertisers and agencies are seeking transparency, brand safety, quality, and control.  As a result, clients have had growing concerns when it comes to buying inventory through networks and exchanges. They often wonder: “How will my brand be protected? Where will my campaign really run? How do I make sense of the various targeting capabilities and data sources?”  In light of these concerns, the IAB has released the “Networks & Exchanges Quality Assurance Guidelines.” The guidelines are intended to provide increased simplicity, transparency, and control for the buying community (i.e., marketers, agencies, and publishers). Based on feedback from members of this community, I’m confident that the implementation of these guidelines will result in providing confidence and clarity that buyers seek and an overall stronger marketplace for all parties alike.

Read More: ClickZ

AOL (NYSE: AOL) CEO Tim Armstrong knew he would have to do a lot of investor soothing given that it posted another tough earnings report for Q2. He described the mission before him as very simple: making a sick company a healthy one. Invoking Warren Buffett’s “snowball” metaphor for the growth of his portfolio depending on finding a wet snowball and a steep hill to roll it down. “We’ve got a tightly packed snowball” at AOL, Armstrong said. He also described a “platform war” currently going on in Silicon Valley and how “content is the ammunition” and AOL will be a central supplier of that firepower. In explaining the dismal ad prospects, despite the recovery, Armstrong said advertisers continue to lag consumers in adopting online media.  Video is going to be a focus for AOL and Armstrong noted that there will be some branded entertainment partnerships announced shortly. StudioNow, which it bought last winter, grew 25 percent in terms of video output from the last quarter. “You will see a new home page that is targeted heavily around video this quarter,” Armstrong said.  On the local front, AOL’s hyperlocal play Patch added 39 new towns for a total of 83 localities in its network.  “Nobody likes to show up to these calls and report down numbers,” but Armstrong wanted investors to known that he has his own money tied up in AOL as well and asked for continued patience as he attempts to turn it around.  Meanwhile, Q3’s results is looking “choppy.” In terms of products he is happy about, Armstrong again focused on the homepage—which attracts about 15 million uniques—and Patch and Mapquest.

Read More: PaidContent.org

Google CEO Schmidt: “People Aren’t Ready for the Technology Revolution”

Eric Schmidt spoke at the Techonomy conference in Lake Tahoe today and dropped some serious rhetorical bombs. “There was 5 exabytes of information created between the dawn of civilization through 2003,” Schmidt said, “but that much information is now created every 2 days, and the pace is increasing…People aren’t ready for the technology revolution that’s going to happen to them.”   The Techonomy conference is a gathering of people from around the globe seeking to use technology to solve the world’s big problems. Schmidt spoke there today and said that people need to get ready for major technology disruption, fast.  The bulk of what’s contributing to this explosion of data, Schmidt says, is user generated content. From that content, far more prediction than we’ve seen today is possible and will be a factor in the future.  “If I look at enough of your messaging and your location, and use Artificial Intelligence,” Schmidt said, “we can predict where you are going to go.”   “Show us 14 photos of yourself and we can identify who you are. You think you don’t have 14 photos of yourself on the internet? You’ve got Facebook photos! People will find it’s very useful to have devices that remember what you want to do, because you forgot…But society isn’t ready for questions that will be raised as result of user-generated content.”

Read More: ReadWriteWeb.com

Demand Media Extends Content Model To Other Publishers, Hearst And Gannett First To Sign Up

Demand Media on Thursday debuted a new service for publishers to pad their online offerings with the work of independent freelancers. Two of the first properties to employ Content Channels, so-called, include Hearst Corp.’s SFGate.com and Chron.com.  “Hearst is the second major publisher to select our product for their sites,” said Steve Semelsberger, SVP and general manager of the Business Solutions Group for Demand Media. (The first major publisher was Gannett’s USA Today, which recently employed Demand to power its “TravelTips” section.) Semelsberger said Demand Media’s studio team worked closely with the editorial teams of both SFGate.com and Chron.com to make sure the Content Channels met their editorial standards.  In the case of the Houston Chronicle’s Chron.com, the team worked with Demand Media to create a “Small Business Resource Center” to complement its existing business news coverage by incorporating thousands of business-related articles and videos. Content Channels also went live this week on San Francisco Chronicle’s SFGate.com for its “Home Guides” section.

Read More: MediaPost

IAB Report Slams Most Online Research Methods

Watch out, research firms! The Interactive Advertising Bureau has embarked on a broad initiative to improve online brand effectiveness research, and its initial findings aren’t pretty.  What’s wrong with most research that attempts to measure ad effectiveness? Small respondent size and low response rates for starters, according to an initial report from the IAB.  Above all else, the validity of such research is threatened “by the extremely low response rates achieved in most IAE studies,” according to Paul Lavrakas, Ph.D., the report’s author, and former chief research methodologist for the Nielsen Company.  Average research is also “threatened by the near-exclusive use of quasi-experimental research designs rather than classic experimental designs,” in the words of Lavrakas, author of “Telephone Survey Methods: Sampling, Selection, and Supervision.”  Worse still, industry research is often compromised by “a lack of valid empirical evidence that the statistical weighting adjustments … adequately correct for the biasing effects,” Lavrakas attests.  “In instances where the sample size is at the lower end of this range [less than 800 participants] and the clients want subsample analyses to be conducted … these subsamples may not have enough members in them to provide precise analyses,” Lavrakas concludes. “Thus, subsample analyses based on small sized subsamples [fewer than 100 participants in the subsample] will have relative large sampling errors.”

Read More: MediaPost

The banner ad is the Web’s original advertising format, but many have viewed it as a disappointment. Prices for display ads quickly tumbled, and marketers fell in love with targeted search options.  That’s not to say display units are on their way out. On the contrary, tens of millions of dollars in venture capital is flowing into ad technology. Investors are betting that a market the Interactive Advertising Bureau pegged at $8 billion in 2009 can quickly grow five times or more with the help of better machinery. (See also: “Display Ads Aim for a Banner Year.”)   “If you take the logic behind targeting to the extreme, it’s all about discovering hidden tier-one inventory,” said Terence Kawaja, managing director of GCA Savvian Advisors. “There’s a lot of inefficiency in inventory pricing.”  Inventory aggregator AdMeld is the latest company to benefit from this belief, closing a $15 million Series C round of funding that brings its backing to $30 million. Norwest Venture Partners led the round, which included AdMeld’s previous VCs as well as a strategic backing from Time Warner Investments.  AdMeld operates a tech platform that publishers use to maximize the amount of money they make from display ads. Publishers like Discovery, Fox News, Reuters and Pandora use its yield-optimization software to determine how best to package display ad inventory for audience-based buys.

Read More: AdWeek

Simplifying The Narrative

Josh Chasin of comScore can definitely count me among his fans.  He wrote a great article late last year on the limitations of CTR as a metric.  A couple weeks back he wrote another great one that I have been looking for a moment to comment on.  Between the upcoming product launch and the 1 year old I finally found a little time, somewhat belatedly.  As I read it, the main theme of Josh’s most recent article was that as an industry we have inhibited the migration of brand-focused budgets online with complex and conflicting narratives, which cause advertisers essentially to throw up their hands and look for reasons not to spend.  I couldn’t agree more.  In fact, I don’t think Josh would object to framing this as a different angle on the same idea I discussed in a post last year (Josh – feel free to comment if I am taking your name in vain).  Regardless of the angle we each take on the story, we’re clearly in violent agreement that the narrative needs to be simpler.  Josh is also quite correct that the 30-spot is an extremely compelling creative format, next to which a hastily-assembled static banner can look, well, flat.  However, as I have previously noted, within 5 years about 80% of households will have the capability to fast forward through that compelling creative.  Online creative formats get more compelling every year – it’s not hard to imagine a well-made pre-roll, rich media or even animated flash creative execution comparing favorably to a TV ad that is watched at 10X normal speed with no sound.  Even before DVRs reach their inevitable tipping point, the research shows that online advertising drives sales at least as well as TV.

Read More: Brand.net

The Web’s New Gold Mine: Your Secrets

Hidden inside Ashley Hayes-Beaty’s computer, a tiny file helps gather personal details about her, all to be put up for sale for a tenth of a penny.  The file consists of a single code— 4c812db292272995e5416a323e79bd37—that secretly identifies her as a 26-year-old female in Nashville, Tenn.   The code knows that her favorite movies include “The Princess Bride,” “50 First Dates” and “10 Things I Hate About You.” It knows she enjoys the “Sex and the City” series. It knows she browses entertainment news and likes to take quizzes.  “Well, I like to think I have some mystery left to me, but apparently not!” Ms. Hayes-Beaty said when told what that snippet of code reveals about her. “The profile is eerily correct.”  Ms. Hayes-Beaty is being monitored by Lotame Solutions Inc., a New York company that uses sophisticated software called a “beacon” to capture what people are typing on a website—their comments on movies, say, or their interest in parenting and pregnancy. Lotame packages that data into profiles about individuals, without determining a person’s name, and sells the profiles to companies seeking customers. Ms. Hayes-Beaty’s tastes can be sold wholesale (a batch of movie lovers is $1 per thousand) or customized (26-year-old Southern fans of “50 First Dates”).  “We can segment it all the way down to one person,” says Eric Porres, Lotame’s chief marketing officer.

One of the fastest-growing businesses on the Internet, a Wall Street Journal investigation has found, is the business of spying on Internet users.  The Journal conducted a comprehensive study that assesses and analyzes the broad array of cookies and other surveillance technology that companies are deploying on Internet users. It reveals that the tracking of consumers has grown both far more pervasive and far more intrusive than is realized by all but a handful of people in the vanguard of the industry. 

• The study found that the nation’s 50 top websites on average installed 64 pieces of tracking technology onto the computers of visitors, usually with no warning. A dozen sites each installed more than a hundred. The nonprofit Wikipedia installed none.

• Tracking technology is getting smarter and more intrusive. Monitoring used to be limited mainly to “cookie” files that record websites people visit. But the Journal found new tools that scan in real time what people are doing on a Web page, then instantly assess location, income, shopping interests and even medical conditions. Some tools surreptitiously re-spawn themselves even after users try to delete them.

• These profiles of individuals, constantly refreshed, are bought and sold on stock-market-like exchanges that have sprung up in the past 18 months.

The new technologies are transforming the Internet economy. Advertisers once primarily bought ads on specific Web pages—a car ad on a car site. Now, advertisers are paying a premium to follow people around the Internet, wherever they go, with highly specific marketing messages.  In between the Internet user and the advertiser, the Journal identified more than 100 middlemen—tracking companies, data brokers and advertising networks—competing to meet the growing demand for data on individual behavior and interests.  The data on Ms. Hayes-Beaty’s film-watching habits, for instance, is being offered to advertisers on BlueKai Inc., one of the new data exchanges.  “It is a sea change in the way the industry works,” says Omar Tawakol, CEO of BlueKai. “Advertisers want to buy access to people, not Web pages.”  The Journal examined the 50 most popular U.S. websites, which account for about 40% of the Web pages viewed by Americans. (The Journal also tested its own site, WSJ.com.) It then analyzed the tracking files and programs these sites downloaded onto a test computer.  As a group, the top 50 sites placed 3,180 tracking files in total on the Journal’s test computer. Nearly a third of these were innocuous, deployed to remember the password to a favorite site or tally most-popular articles.

But over two-thirds—2,224—were installed by 131 companies, many of which are in the business of tracking Web users to create rich databases of consumer profiles that can be sold.  The top venue for such technology, the Journal found, was IAC/InterActive Corp.’s Dictionary.com. A visit to the online dictionary site resulted in 234 files or programs being downloaded onto the Journal’s test computer, 223 of which were from companies that track Web users.  The information that companies gather is anonymous, in the sense that Internet users are identified by a number assigned to their computer, not by a specific person’s name. Lotame, for instance, says it doesn’t know the name of users such as Ms. Hayes-Beaty—only their behavior and attributes, identified by code number. People who don’t want to be tracked can remove themselves from Lotame’s system.  And the industry says the data are used harmlessly. David Moore, chairman of 24/7 RealMedia Inc., an ad network owned by WPP PLC, says tracking gives Internet users better advertising.  “When an ad is targeted properly, it ceases to be an ad, it becomes important information,” he says.  Tracking isn’t new. But the technology is growing so powerful and ubiquitous that even some of America’s biggest sites say they were unaware, until informed by the Journal, that they were installing intrusive files on visitors’ computers.

The Journal found that Microsoft Corp.’s popular Web portal, MSN.com, planted a tracking file packed with data: It had a prediction of a surfer’s age, ZIP Code and gender, plus a code containing estimates of income, marital status, presence of children and home ownership, according to the tracking company that created the file, Targus Information Corp.  Both Targus and Microsoft said they didn’t know how the file got onto MSN.com, and added that the tool didn’t contain “personally identifiable” information.  Tracking is done by tiny files and programs known as “cookies,” “Flash cookies” and “beacons.” They are placed on a computer when a user visits a website. U.S. courts have ruled that it is legal to deploy the simplest type, cookies, just as someone using a telephone might allow a friend to listen in on a conversation. Courts haven’t ruled on the more complex trackers.  The most intrusive monitoring comes from what are known in the business as “third party” tracking files. They work like this: The first time a site is visited, it installs a tracking file, which assigns the computer a unique ID number. Later, when the user visits another site affiliated with the same tracking company, it can take note of where that user was before, and where he is now. This way, over time the company can build a robust profile.

One such ecosystem is Yahoo Inc.’s ad network, which collects fees by placing targeted advertisements on websites. Yahoo’s network knows many things about recent high-school graduate Cate Reid. One is that she is a 13- to 18-year-old female interested in weight loss. Ms. Reid was able to determine this when a reporter showed her a little-known feature on Yahoo’s website, the Ad Interest Manager, that displays some of the information Yahoo had collected about her.  Yahoo’s take on Ms. Reid, who was 17 years old at the time, hit the mark: She was, in fact, worried that she may be 15 pounds too heavy for her 5-foot, 6-inch frame. She says she often does online research about weight loss.  “Every time I go on the Internet,” she says, she sees weight-loss ads. “I’m self-conscious about my weight,” says Ms. Reid, whose father asked that her hometown not be given. “I try not to think about it…. Then [the ads] make me start thinking about it.”  Yahoo spokeswoman Amber Allman says Yahoo doesn’t knowingly target weight-loss ads at people under 18, though it does target adults.  “It’s likely this user received an untargeted ad,” Ms. Allman says. It’s also possible Ms. Reid saw ads targeted at her by other tracking companies.  Information about people’s moment-to-moment thoughts and actions, as revealed by their online activity, can change hands quickly. Within seconds of visiting eBay.com or Expedia.com, information detailing a Web surfer’s activity there is likely to be auctioned on the data exchange run by BlueKai, the Seattle startup.

Each day, BlueKai sells 50 million pieces of information like this about specific individuals’ browsing habits, for as little as a tenth of a cent apiece. The auctions can happen instantly, as a website is visited.   Spokespeople for eBay Inc. and Expedia Inc. both say the profiles BlueKai sells are anonymous and the people aren’t identified as visitors of their sites. BlueKai says its own website gives consumers an easy way to see what it monitors about them.  Tracking files get onto websites, and downloaded to a computer, in several ways. Often, companies simply pay sites to distribute their tracking files.  But tracking companies sometimes hide their files within free software offered to websites, or hide them within other tracking files or ads. When this happens, websites aren’t always aware that they’re installing the files on visitors’ computers.  Often staffed by “quants,” or math gurus with expertise in quantitative analysis, some tracking companies use probability algorithms to try to pair what they know about a person’s online behavior with data from offline sources about household income, geography and education, among other things.  The goal is to make sophisticated assumptions in real time—plans for a summer vacation, the likelihood of repaying a loan—and sell those conclusions.  Some financial companies are starting to use this formula to show entirely different pages to visitors, based on assumptions about their income and education levels.  Life-insurance site AccuquoteLife.com, a unit of Byron Udell & Associates Inc., last month tested a system showing visitors it determined to be suburban, college-educated baby-boomers a default policy of $2 million to $3 million, says Accuquote executive Sean Cheyney. A rural, working-class senior citizen might see a default policy for $250,000, he says.  “We’re driving people down different lanes of the highway,” Mr. Cheyney says.  Consumer tracking is the foundation of an online advertising economy that racked up $23 billion in ad spending last year. Tracking activity is exploding. Researchers at AT&T Labs and Worcester Polytechnic Institute last fall found tracking technology on 80% of 1,000 popular sites, up from 40% of those sites in 2005.

The Journal found tracking files that collect sensitive health and financial data. On Encyclopaedia Britannica Inc.’s dictionary website Merriam-Webster.com, one tracking file from Healthline Networks Inc., an ad network, scans the page a user is viewing and targets ads related to what it sees there. So, for example, a person looking up depression-related words could see Healthline ads for depression treatments on that page—and on subsequent pages viewed on other sites.  Healthline says it doesn’t let advertisers track users around the Internet who have viewed sensitive topics such as HIV/AIDS, sexually transmitted diseases, eating disorders and impotence. The company does let advertisers track people with bipolar disorder, overactive bladder and anxiety, according to its marketing materials.  Targeted ads can get personal. Last year, Julia Preston, a 32-year-old education-software designer in Austin, Texas, researched uterine disorders online. Soon after, she started noticing fertility ads on sites she visited. She now knows she doesn’t have a disorder, but still gets the ads.  It’s “unnerving,” she says.

Tracking became possible in 1994 when the tiny text files called cookies were introduced in an early browser, Netscape Navigator. Their purpose was user convenience: remembering contents of Web shopping carts.  Back then, online advertising barely existed. The first banner ad appeared the same year. When online ads got rolling during the dot-com boom of the late 1990s, advertisers were buying ads based on proximity to content—shoe ads on fashion sites.  The dot-com bust triggered a power shift in online advertising, away from websites and toward advertisers. Advertisers began paying for ads only if someone clicked on them. Sites and ad networks began using cookies aggressively in hopes of showing ads to people most likely to click on them, thus getting paid.  Targeted ads command a premium. Last year, the average cost of a targeted ad was $4.12 per thousand viewers, compared with $1.98 per thousand viewers for an untargeted ad, according to an ad-industry-sponsored study in March.  The Journal examined three kinds of tracking technology—basic cookies as well as more powerful “Flash cookies” and bits of software code called “beacons.” 

More than half of the sites examined by the Journal installed 23 or more “third party” cookies. Dictionary.com installed the most, placing 159 third-party cookies.  Cookies are typically used by tracking companies to build lists of pages visited from a specific computer. A newer type of technology, beacons, can watch even more activity.  Beacons, also known as “Web bugs” and “pixels,” are small pieces of software that run on a Web page. They can track what a user is doing on the page, including what is being typed or where the mouse is moving.  The majority of sites examined by the Journal placed at least seven beacons from outside companies. Dictionary.com had the most, 41, including several from companies that track health conditions and one that says it can target consumers by dozens of factors, including zip code and race.  Dictionary.com President Shravan Goli attributed the presence of so many tracking tools to the fact that the site was working with a large number of ad networks, each of which places its own cookies and beacons. After the Journal contacted the company, it cut the number of networks it uses and beefed up its privacy policy to more fully disclose its practices.  The widespread use of Adobe Systems Inc.’s Flash software to play videos online offers another opportunity to track people. Flash cookies originally were meant to remember users’ preferences, such as volume settings for online videos.

But Flash cookies can also be used by data collectors to re-install regular cookies that a user has deleted. This can circumvent a user’s attempt to avoid being tracked online. Adobe condemns the practice.  Most sites examined by the Journal installed no Flash cookies. Comcast.net installed 55.  That finding surprised the company, which said it was unaware of them. Comcast Corp. subsequently determined that it had used a piece of free software from a company called Clearspring Technologies Inc. to display a slideshow of celebrity photos on Comcast.net. The Flash cookies were installed on Comcast’s site by that slideshow, according to Comcast.  Clearspring, based in McLean, Va., says the 55 Flash cookies were a mistake. The company says it no longer uses Flash cookies for tracking.

CEO Hooman Radfar says Clearspring provides software and services to websites at no charge. In exchange, Clearspring collects data on consumers. It plans eventually to sell the data it collects to advertisers, he says, so that site users can be shown “ads that don’t suck.” Comcast’s data won’t be used, Clearspring says.  Wittingly or not, people pay a price in reduced privacy for the information and services they receive online. Dictionary.com, the site with the most tracking files, is a case study.  The site’s annual revenue, about $9 million in 2009 according to an SEC filing, means the site is too small to support an extensive ad-sales team. So it needs to rely on the national ad-placing networks, whose business model is built on tracking.   Dictionary.com executives say the trade-off is fair for their users, who get free access to its dictionary and thesaurus service.  “Whether it’s one or 10 cookies, it doesn’t have any impact on the customer experience, and we disclose we do it,” says Dictionary.com spokesman Nicholas Graham. “So what’s the beef?”

The problem, say some industry veterans, is that so much consumer data is now up for sale, and there are no legal limits on how that data can be used.  Until recently, targeting consumers by health or financial status was considered off-limits by many large Internet ad companies. Now, some aim to take targeting to a new level by tapping online social networks.  Media6Degrees Inc., whose technology was found on three sites by the Journal, is pitching banks to use its data to size up consumers based on their social connections. The idea is that the creditworthy tend to hang out with the creditworthy, and deadbeats with deadbeats.  “There are applications of this technology that can be very powerful,” says Tom Phillips, CEO of Media6Degrees. “Who knows how far we’d take it?”

Read More: WSJ.com (Entire Article Here)

NBC Universal is getting into the ad network business, first selling inventory across a handful of its own properties, then possibly expanding into others.  The network, called Universal Audience Platform, launched today with 21 NBCU properties, including Bravotv.com, NBC.com, Oxygen.com and Syfy.com. While advertisers have previously had the ability to buy packages that spanned NBCU properties, this is the first time they can buy display inventory based on audience segment rather than brand.  Asked why NBCU had chosen now to launch an ad network, Peter Naylor, VP of digital sales, said the company “has the impressions and uniques” to form “a credible entrance to the market.” But that doesn’t mean it will limit itself to NBCU properties.  “This is phase one,” he said. “Phase two is going to be when we welcome in some other sites we don’t wholly own and operate.”  Just when – or if – that will come to pass isn’t yet clear, said Naylor. But he did confirm that discussions were under way to find other suitable properties to add to the network.  For now, the formation of UAP means that NBCU will be “dialing down” its dependence on third-party ad networks, said Naylor. The company has made deals with BlueKai, Nielsen and Quantcast to supply the demographic data that it will use to sell audience segments to advertisers.

Read More: ClickZ

Insights from OMMA Behavioral Conference on Display Marketing

Several members of the EF team attended the OMMA Behavioral Conference in San Francisco last week. The focus of the conference was to explore how behavioral targeting has changed from simply targeting audiences by the Web pages they have recently viewed to utilizing targeting data from multiple sources such as social networks, site and search re-targeting, and various third party data providers. Because there are so many targeting channels, attributing conversion to the appropriate source has become very difficult for advertisers. The difficulty of attribution modeling quickly became a hot topic at the conference.  Abhishek Pani, our Director of Research & Quantitative Marketing, discussed a new attribution framework in his presentation titled “Evaluating the Marginal Value of Display”.  Optimal budget allocation across channels is the fundamental problem that advertisers want to solve but given the lack of proper attribution models, they are forced to rely on simple heuristics to allocate revenues. Current attribution offerings in the industry ignore important variables such as the effect of time and cross channel demand elasticity (change in demand in channel A that results from a small change in spend in channel B). Incorrect attribution will result in sub-optimal budget allocation and lower the return on advertising investment. Because our platform manages across all channels of advertising (search, display, and soon social), we are able to measure, experiment, and build very accurate allocation models based on marginal contributions of each channel.  Abhishek discussed our modeling strategy in greater detail during his presentation.

Read More: blog.eFrontier.com

BuzzLogic to Announce New Social Media Ad Units

By combining ads with content BuzzLogic believes it can give consumers using social media a better ad experience and better integrate advertising with the content against which it is presented.   “We’ve been running all kinds of IAB sanctioned rich media for a while, but the BuzzRoll product is much more customized and gives marketers more options,” said Peter O’Sullivan, BuzzLogic’s VP of sales, in an interview with paidContent.  “BuzzRoll, as a social media ad unit, will drive greater engagement among blog readers, since it encourages them to share everything from a company’s blog content or a white paper, and Twitter feeds, to video and Facebook apps. This is just a simpler way for marketers to do it.  For example, if a product wanted to associate itself with a green image it could place an ad on a blog about green issues and, by careful keyword selection, program it to pull in content about the topic from around the Internet. That information is then scrolled along the bottom of the rich media ads.  According to ClickZ, the units can also host video and Facebook applications via Facebook’s APIs.

Read More: BizReport

Rocket Fuel has developed a formula to lower cost per action (CPA) and engagement metrics by an average of 43.75% compared with other targeting methods. It built custom campaigns combining BlueKai data based on specific audience models using key metrics to serve up ads in real-time with its own suite of targeting algorithms, analytics, expert analysis and real-time impression-level bidding.  The campaign, designed for an unnamed consumer packaged goods company, focused on indentifying in-market audiences that could scale as needed. Rocket Fuel simplified the problem through rapid testing and automation of multiple kinds of data to target the correct audience.  Tapping into this model to combine technology with data brought success to automakers, retailers, consumer packaged goods (CPG), and those in the travel industry. “It’s not just about one sector or one kind of metric,” says Richard Frankel, president of Rocket Fuel. “Direct-response marketers have one type of metrics, and brand and packaged good marketers have another.”

Read More: MediaPost

Cars May Not Be Flying Off Lots, But Auto Ad Volume Is Higher Than Ever

The recent hard times in the automotive industry have not dented the industry’s display ad volume, according to a new report from campaign management firm MediaMind (until recently known as Eyeblaster).  On the contrary, even as automakers were experiencing declining sales, there has been a significant increase in automotive ad impressions served by MediaMind, and specifically in the average impressions served per advertiser.  Data on online display advertising impressions served by MediaMind from 2007 to 2009 suggest that the global slowdown in automotive sales has actually done well for automotive Display Advertising.  In 2008, the number of total impressions increased and there has been no decline in the average impressions per advertiser. Furthermore, from February 2009, impressions increased significantly, potentially reflecting tighter competition for every customer and plans by governments in Europe and North America to launch new car rebate programs to stimulate the economy.  Last year — one of the worst years in recent memory for automakers — online display impressions per advertiser served by MediaMind shot up even further.  This shows that when ad budgets are becoming tight, advertisers are trading offline budgets for more targeted and efficient online campaigns, the report suggests. “For automakers, online display advertising represents a cost-effective way to interact with prospective customers.”

Read More: MediaPost

The online video ad network space has earned something of a reputation for murkiness, which has helped fuel interest in a string of ad verification companies that aim to ensure brands’ ads run where they are supposed to.  ScanScout, one of the growing players in online video, already claims that it’s technology can prevent an advertiser’s ads from running alongside questionable content. But to take things a step further, the company says it will now be fully transparent upfront with its advertisers about what sites their campaigns will appear on.  Buyers can now peruse ScanScout’s lists of hundreds partner sites — which include MLB.com, NBC and Fox sites, as well as Gannett and Warner Bros. Web properties — picking ahead of time where they’d like their clients’ ads to run.  That, says ScanScout evp Jason Krebs should take a lot of the uncertainty out of buying online video — and help risk-averse traditional brands embrace the medium. “Brand dollars have stayed away from the space,” he said. “We want to help brands figure out upfront what they are buying.”

Read More: AdWeek

How Paypal Can Help Save Media—And Itself

Earlier this month, John Donahoe, CEO of eBay (NSDQ: EBAY) and its subsidiary Paypal, was interviewed at the D8 conference. It was a flashback to see him speak:  I had worked under him 15 years ago when I was a freshly minted undergrad just hired into the San Francisco office he ran for Bain & Company. A strapping and charismatic up-and-comer, John was known for his bold visionary talks and his strident walk.  But at D8, I didn’t see that confidence. He spoke of eBay’s connections between buyers and sellers as though he hoped we’d believe it was a new trend; meanwhile far from his Santa Clara headquarters, Gilt Groupe and Groupon are reinventing e-commerce. On Paypal, he looked backwards to the innovation of getting financial services online, rather than forward to the app revolution. Overall he looked staid, the way eBay and Paypal now look to me – entangled by their legacy, unable to cut the cords to freely enjoy the new boom around them.  With that in mind, I’d like to offer Paypal the chance to get ahead in an area that still has room for wild success. Media desperately needs help to become financially viable – and consumers will need to foot part of the bill to make it so. It’s clear that others see the opportunity here: Facebook surely wants to spread its Facebook Credits currency to take over the world the way ‘Like’ has; and now word comes that Google (NSDQ: GOOG) is readying Newspass in its bid to capture consumer payments for media. But more than these other companies, Paypal, with its huge footprint of consumer accounts and years of web experience, is in the catbird seat to be media’s savior. 

Read More: PaidContent.org

Guaranteeing Data And Audience Validation Reporting

Known as the “Quality Data Guarantee program,” AudienceScience has announced that it will start verifying its own data as well as those of other vendors in order to guarantee for clients that they’re really getting the audience they wanted. New audience verification reports will also be offered. Read the release.  AudienceScience CEO Jeff Hirsch discussed the new program and reporting as well as its implications.

AdExchanger.com: What has pushed AudienceScience to offer the Quality Data Guarantee?

JH: There are several reasons. First, we are strong believers in the notion that the creator of data has the right to determine how that data gets used. The industry needs standards to support this. AudienceScience has spent years developing relationships with thousands of data sources that specifically and contractually, spell out our right to utilize data to power campaigns for our advertiser and publisher partners. We think it is important for marketers to know, with absolute certainty, that they have the right to utilize the data powering their campaigns. Secondly, we are concerned that data collection does not always adhere to privacy guidelines. It is absolutely essential that we get this right as an industry. We have invested in a significant way to protect consumer rights and we want marketers to ask the tough questions of any company utilizing data – are consumer rights protected? Lastly, we want our partners to know that their own data is protected and that they have complete control over its collection and utilization.

Read More: AdExchanger

Apple Inc. is now collecting the “precise,” “real-time geographic location” of its users’ iPhones, iPads and computers.  In an updated version of its privacy policy, the company added a paragraph noting that once users agree, Apple and unspecified “partners and licensees” may collect and store user location data.  When users attempt to download apps or media from the iTunes store, they are prompted to agree to the new terms and conditions. Until they agree, they cannot download anything through the store.  The company says the data is anonymous and does not personally identify users. Analysts have shown, however, that large, specific data sets can be used to identify people based on behavior patterns.  An increasing number of iPhone apps ask users for their location, which is then used by the application or even uploaded to the app’s maker. Apps like the Twitter application Tweetie and Google Maps make frequent use of location data, either to help the user get oriented geographically or to associate the user’s action with a specific location (as when a tweet is geotagged).  Apple says in its privacy policy that it uses personal information to “improve our services, content, and advertising.” 

Read More: LATimes.com

Zuckerberg: Facebook Will Add Creativity to Ad Platform

CEO Mark Zuckerberg believes Facebook needs to do as good a job building out its advertising offerings as it has done with its developer platform.  Speaking at the Cannes Lions festival, where he was awarded Media Person of the Year, Zuckerberg told the audience to expect more robust tools for reaching Facebook’s approximately 500 million monthly active users.  “It’s a similar dynamic on marketer side as it is on developer side. We’ve built an A-class developer platform and we need to do the same for advertisers,” he said.  He said any changes the company makes will support more creativity in the ad experience, though what exactly that means remains unclear.  “We think the ecosystem…is gong to be a lot better if we add more creative [elements] to it,” he said. “The more you’re able to customize and personalize the products you offer and the marketing you have, the more effective it’s going to be.”

Read More: ClickZ

Six months into 2010 and things are looking downright sunny, unless you’re BP, or want to swim in the ocean anytime in the next five years. So far the economic outlook is good and recent reports suggest that the digital world is poised for growth. Agencies are hiring again, staffing up new roles, and expanding teams. Clients are cautiously coming back to the digital world. Life is good in the kingdom…or so it seems.  A small storm is brewing. It’s not a client or budget problem; it’s an integration problem. Every agency is facing the problem of matching their user engagement strategy with their data-driven search efforts. How we approach this problem is key to organizing our agency resources to work with emerging trends and avoid the pending storm.  Search has always fallen into the category of algorithm-driven strategy, but with the rise of ad exchanges, demand-side platforms, and trading desks – the water has gotten murkier. With this “new” way to buy, agencies aren’t only educating clients on this new format, but also aligning an organization to deliver against it.

Read More: ClickZ

Apple’s Next Disruption: Advertising

If anything is clear from the punches being thrown by Google at Apple over mobile advertising, it is that the search giant understands what is at stake.  As mobile advertising comes into its own, Google should be well-positioned to grab a big piece of it. Prospects for other large media companies, online or traditional, are less sure.  It is easy to underestimate the importance of mobile Internet and advertising. ComScore estimates 48 million people had smartphones in the U.S. in the three months to April, of whom only 5.4 million searched the Web on the devices on a near-daily basis. In contrast, the firm counted 214 million people searching the Web generally in April.  Estimates from eMarketer put mobile advertising at $593 million this year, compared with about $25 billion for total online advertising.  But eMarketer’s numbers were issued last September, before the release of the iPad. The Apple tablet’s strong sales so far confirm consumer demand for tablet computers and suggest consumers’ online behavior is likely to become a lot more mobile. That is likely already the case for owners of smartphones with robust Web browsers like iPhones or Android-powered devices.  Android and iPhone devices commanded 37% of the smartphone market in the first quarter between them, according to Nielsen, against 35% for Research in Motion’s BlackBerry. Nielsen’s data also show that close to 90% of iPhone and Android owners used the mobile Internet in the previous 30 days, compared with 73% for all smartphones. Browsing the Web on a BlackBerry can be a frustrating experience. So as RIM’s market share declines and iPhone, iPad and Android devices become more common, mobile Web use will take off.  Data are scarce on how mobile browsing affects online behavior at a PC. But the ability to do Web searches anywhere likely reduces those done at a desk. Searching could become less important as people rely on apps for certain functions.  All this should spark an ad shift to mobile, particularly to apps. Admittedly, advertisers can take years to respond to changes in consumer behavior. But Apple’s plunge into the ad market with iAds, which serves advertising inside apps, is likely to accelerate the change. That it drew $60 million in second-half 2010 commitments from such marketers as General Electric, Unilever and Nissan Motor indicates mobile-ad estimates are too low.  Who will suffer from the advance of mobile advertising? TV networks, potentially, if the caliber of big-brand advertisers snagged by Apple continues. As the mobile audience is likely to fragment among applications, big Internet portals also may be at risk. Regardless, mobile likely will cause a bigger, faster disruption to the ad world than is generally appreciated.

Read More: WSJ