Privacy and the Paradox of Targeting

I’ve discussed multiple times in the past the paradox that when you ask consumers whether they want to be targeted by online ads they express discomfort and displeasure. But they also say they only want “relevant” ads. This is a direct conflict in most cases; the only online ad channel that can reconcile that conflict is search.

More and more ambitious and aggressive targeting has been developed over the past several years in a effort to make display and rich media advertising online perform better and more like search — matching ads with intent (inferred from browsing history or other variables). A new example of this more aggressive variety of targeting comes in the form of a company called Cardlytics, which is identifying consumers through and using their online banking statements as a marketing channel. AdAge explains:

Imagine signing in to your online-banking account and finding promotions linked to your transactions. Underneath a transaction for a restaurant, there’s an offer from that eatery for $10 cash back when you spend a minimum of $20. And underneath a purchase at an apparel chain, a rival offers 15% cash back for shopping at its store or website . . .

Cardlytics is privy to transaction data: the name of the merchant, date of the purchase, how much was spent and the customer’s ZIP code. But it does not have access to personally identifiable data like customer names, account numbers or home addresses, which are managed by participating banks. Because of that, he downplays privacy concerns, noting that Cardlytics goes through “lots and lots” of regulatory steps in order to work with financial institutions. Customer information remains behind the bank’s firewall.

While the idea of this is both intrusive and potentially offensive, the company says that privacy is taken care of an consumers can opt out. Consumers are also much more open to deals and coupons than traditional ads.

The rise and popularity of Behavioral targeting prompted the US FTC to get involved and hold hearings last year on targeting and privacy. For its part the IAB is trying to keep the government and regulators at bay with self-regulation. That includes new consumer outreach efforts:

The Interactive Advertising Bureau, in conjunction with the ad network trade group Network Advertising Initiative, has announced a new tactic aimed at increasing consumer awareness surrounding behavioral targeting: telling people up front exactly why they are receiving a particular Web ad.

More specifically, the two groups are advocating for publishers and ad networks to run notices alongside banner ads in the form of text links that enable users to find out more information on where that ad came from—and even opt out of receiving similar behavior-based ads in the future. The initiative is being called CLEAR Ad Notice, which stands for “Control Links for Education and Advertising Responsibly.”

This new IAB strategy represents adoption of an approach that Google introduced with its “interest-based ads.” The Google approach is a good one: simple language combined with the ability to change ad preferences or opt-out of receiving targeted ads altogether. Yahoo also now does this.

Giving consumers clear information and control is a potential solution to this targeting-tracking paradox; if consumers understand what kinds of information are being collected and used to serve ads to them they may choose to do nothing, recognizing that the targeting will make those ads more “relevant.” In an optimal case you might even get some additional information about the user.

During a briefing related to privacy Google said for every 15 people who click through to its ad manager’s privacy controls and preferences that “four users edit preferences, one opts out and 10 do nothing.”

Many in online marketing have paternalistic notions about privacy and targeting or operate under the assumption that many people don’t really care about privacy — especially younger people. However a very new study, based on a 2009 telephone survey with 1,000 younger and older US adults, shows that younger users do in fact care about privacy.

The authors of the report wrote, “We conclude then that that young-adult Americans have an aspiration for increased privacy even while they participate in an online reality that is optimized to increase their revelation of personal data.”

The AP summarized the findings at a high level:

  • 88 percent of people of all ages said they have refused to give out information to a business because they thought it was too personal or unnecessary. Among young adults, 82 percent have refused, compared with 85 percent of those over 65.
  • 86 percent believe that anyone who posts a photo or video of them on the Internet should get their permission first, even if that photo was taken in public. Among young adults 18 to 24, 84 percent agreed — not far from the 90 percent among those 45 to 54.
  • 40 percent of adults ages 18 to 24 believe executives should face jail time if their company uses someone’s personal information illegally — the same as the response among those 35 to 44 years old.

The study did find a few generational discrepancies, but there were more similarities.

In an early 2009 conversation the CEO of mobile ad marketplace Smaato, Ragnar Kruse, argued that all mobile advertising should be opt-in. This would remedy any/all privacy issues and potentially make advertising perform better. Placecast has an amazing statistic illustrating this, drawn from the beta phase of the company’s ShopAlerts:

In research we conducted through the holiday season with three brands, 65% of consumers that opted-in to follow a brand made a purchase as a result of receiving messages based on place and time. In essence, location and time are the physical manifestation of purchase intent.

I’ll quote it again: “65% of consumers that opted-in to follow a brand made a purchase as a result of receiving messages based on place and time.”

But this opt-in approach won’t work for most marketers, publishers or ad networks online because too many consumers would simply fail to participate — fail to opt-in. So the Google approach now being championed by the IAB will have to do. But that approach needs to offer simplicity, clarity and control. If it fails to do those things or such a system is abused the feds will come knocking.

Nobody should have a problem with the idea of offering consumers more information and giving them the ability to opt out. Only this sort of approach will address the paradox of privacy and targeting discussed above. Beyond this I could eventually see someone developing a privacy dashboard or ad manager for the entire Internet used by individuals to control and manage the advertising they see or receive.

3 Responses to “Privacy and the Paradox of Targeting”

  1. Terry Howard Says:

    I really wish marketers would have had the foresight to call the strategy something other than “targeting”. I think most of what makes people uncomfortable is the imagery of marketers hiding in the bushes getting ready to shoot them with some kind of used car salesman bullet. There is this misconception that it’s at all useful to know personal information about a consumer, when what marketers really just want to know is broad swaths of anonymous data as it relates to purchasing related practices. We really dropped the ball for ourselves on doing exactly what we preach to clients to do: understand your audience’s concerns and adapt your messaging to address those concerns and make them feel comfortable.

    Even if we could narrow things down to people named Bob who prefer blue socks and take route 9 on the way into work and stop and get an egg mcmuffin every morning around 8:30… the audience set you would have after slicing it that thin would be a waste of your time and money to market too. We measure advertising rates in groups of thousands of impressions for pete’s sake!

  2. Greg Sterling Says:

    Good points all. Search is elegant because it doesn’t rely on data analysis. And I think you’re right there’s a paternalism to targeting that often focuses too narrowly.

    Amazon’s recommendations feature almost always gets it wrong for me. Sometimes it works but most of the time not. There’s also the well-established shared computer issue.

    My Netflix recommendations are dominated by kids films because my kids are the ones who use it most.

  3. Google, Facebook & Privacy « Screenwerk Says:

    […] past privacy battles and recent data argue that privacy is very much still alive. As I wrote on Monday: A very new study, based on a 2009 telephone survey with 1,000 younger and older US […]

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