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January 12, 2009

By Sean P. Egen

Introduction Firms specializing in behavioral targeting (BT) are adept at making assumptions and predictions based on online behavior. Such predictions enable advertisers to provide more relevant ads ‐‐ at least ones they hope are more relevant ‐‐ to consumers. But how adept are BT firms at making predictions about their own industry?

We interviewed eight experts in the field of behavioral and contextual targeting about relevant trends in the industry and where they see things heading. They are:

John Ardis, VP of corporate strategy, ValueClick
Sheldon Gilbert, CEO and founder, Proclivity
Scott Knoll, VP and general manager, Aperture Product Group, Datran Media
Chad Little, CEO, FetchBack
Calvin Lui, CEO, Tumri
Andrew Monfried, CEO and founder, Lotame
Roy Shkedi, CEO and founder, AlmondNet
Omar Tawakol, CEO, BlueKai

Check out what they had to say.

Increased Transparency

The one influential trend all of our BT experts mentioned was an increased emphasis on transparency and privacy issues ‐‐ both by BT firms themselves and by publishers and advertisers. This trend is particularly poignant, given the looming threat of privacy legislation and lawsuits that could affect the industry moving forward.

Chad Little of FetchBack, a firm that specializes in retargeting, says the market has done an above‐average job with transparency so far. However, he also believes that the issue needs to be approached more aggressively ‐‐ especially by advertisers. "I think networks and companies like ours have been very diligent and proactive in making sure this remains in a self‐regulated atmosphere," he says. "But I don't think advertisers have done quite enough there, and I think it's up to us to help push and make sure they do."

Omar Tawakol of BlueKai, a data exchange that focuses on in‐market data, notes that if the industry doesn't behave on its own, it will be forced to by outside parties. "The question is how fast are we going to get there, and are we going to be forced to get there faster than we wanted to?" he asks. Tawakol believes that being fully transparent is critical because once a company is perceived as wearing a "black hat" in the eyes of consumers, it can't pretend to wear a white one.

Roy Shkedi is CEO of AlmondNet, which specializes in aggregating purchase intent and other targetable data. He cites the number of companies joining the Network Advertising Initiative (NAI) ‐‐ which gives consumers the ability to opt out of NAI member ad networks ‐‐ as a positive sign of how seriously the industry is taking privacy issues. "The number of companies, both large and small, who've joined NAI is very encouraging," he says. "Any entity that deals with behavioral targeting on any significant scale, I'd say that the vast majority of them are already members of NAI."

In terms of solving the privacy conundrum, Shkedi believes that government‐imposed regulations would ultimately be less effective than if advertisers would simply refuse to work with companies that are not NAI members, or that don't offer privacy‐sensitive solutions.
John Ardis, VP of corporate strategy for integrated online marketing firm ValueClick, believes the industry is better off than it was eight or nine years ago. But he also says that the way data is managed both online and offline is an issue that still needs to be addressed. "The seriousness and safety in which the online industry manages your data is much farther along than how the offline industry has done it for decades," he says. "So, if we're really talking about how consumer data is used, then let's get serious about it and talk about how it's used across the board."

An Evolving Value Proposition

As you might imagine, all of the BT experts interviewed by iMedia say that most consumers don't mind targeted ads. Rather, they believe people understand that advertising is the price they pay for free online content and services, and the majority of them prefer relevant ads over irrelevant ones. This sentiment was summed up by Sheldon Gilbert, whose Proclivity platform helps marketers and merchandisers create consumer behavior banks. "Our premise is really very simple ‐‐ create a win‐win scenario in the market," he says. "As an end‐consumer, you will no longer be carpet‐bombed every day with irrelevant offers, but with certain brands that are in tune with what you want."

BlueKai's Tawakol says the existing value proposition will evolve as consumers realize just how valuable their data are to advertisers. "I would say, maybe seven years from now, that people will consider data a first‐party asset," he explains. "Like money or mileage, where I might get a trip to Hawaii every year and a half because I gave my data to this particular group."

Andrew Monfried, CEO of Lotame, agrees. His company specializes in providing advanced monetization techniques to social media sites. "I think consumers will be rewarded for their attention," he says. "There's going to be a not‐so‐subtle tradeoff now, where consumers are going to control more about what I call the 'attention economy.'" This "attention economy," says Monfried, is likely to be most evident among younger consumers who devote a lot of time to online activities. They will increasingly look to trade their attention for something of value to them, be it reward points or music or some else.

On the other hand, Scott Knoll of Datran Media believes the trend toward compensating consumers for more comprehensive data will be limited. "I think there's always going to be a model out there, where a small sampling or section of the audience will be willing to receive some sort of reward in exchange for allowing more information on the cookie, but I don't think that's the norm," he says.

Likewise, ValueClick's Ardis thinks the current value proposition on which BT operates works just fine and will remain the norm. "The reward that people get for the use of their information is twofold," he says. "One, they get the continuing freedom of all the content, the entertainment, the shopping, everything that they get online that otherwise would have to be subsidized by some other method like subscription. And the second is the relevant experience they have ‐‐ hopefully, they're only seeing ads or messages that are relevant to them."

The marriage of offline and online data

If you weren't already aware of just how much information offline marketers possess about you, the sheer number of catalogs you received over the holiday season should clue you in. Going forward, several of our BT experts agree that we're likely to see this offline information being merged with online data.

Datran's Knoll says such online and offline integration represents the next evolution of behavioral data, enabling marketers to gain greater insights into each individual person. However, he also notes that such integration will need to be done in an anonymous way.
Proclivity's Gilbert agrees with Knoll. He notes that additional contextual data enable marketers to better target ‐‐ and retailers to better serve ‐‐ consumers. "I think we're going to start to see a lot of convergence between the offline and online world," Gilbert says. "We're literally allowing some of our retailers to better service a customer in the store, on the website, and when they call in to a call center."

More dynamic messaging

A relevant message is critical if the behavioral‐targeting equation is to equal success. But, according to Calvin Lui, CEO of customized ad solutions provider Tumri, some marketers don't pay enough attention to the relevancy side of the equation. "If you spend the money, the effort, and the technology to find these segments, why would you show each of the segments the same message?" Lui asks. "You want to tailor your message to each of the segments. You've got to go that last mile."

Solutions are available that enable customized display ads to be constructed on the fly, based on targeting or performance data. So an automotive ad for a surfer in Los Angeles might feature a convertible, a beach in the background, and a lifestyle‐focused headline, while an Indiana soccer mom may receive an ad from the same automaker featuring a minivan, a rural background, and a safety‐oriented headline.

ValueClick's Ardis agrees that dynamic messaging, in conjunction with effective targeting, is key to a successful outcome. "To combine the strength of targeting methodology with behavioral offers, we've really confined the audience to those who have the best shot of being interested," he says. "And then, once you find them, you deliver a very granular, pretty much one‐to‐one offer or messaging to them. It really puts it on a different level. It takes an already strong approach and makes it stronger."

Bigger budgets

It's only logical that, as the effectiveness, scale, and scope of behavioral targeting increase, so too will the number of dollars being spent on it.

"Unlike a few years ago, when very few people knew what behavioral targeting was, it's very clear to everyone now that it's the No. 1 monetization tool," AlmondNet's Shkedi says. Yet, according to Shkedi, companies are still spending a disproportionate amount of their budgets on paid search ads. "People spend approximately 5.2 percent of their time online on general search engines, such as Google, and only a third of their searches are commercially related," he says. "So it's 1.7 percent of their online time. Well, approximately 40 percent of the online advertising dollars are paid search ads ‐‐ fixed ads that are mainly placed on searchable pages."

Along these lines, ValueClick's Ardis believes behavioral targeting will eventually become a mainstay component in online campaigns. "Where, traditionally, it's been demographic targeting as your foundation, and then campaigns build off of that, I believe that, moving forward, behavioral will be the foundation," he says. "Because it's the richest, most productive kind of targeting there is."

Likewise, FetchBack's Little says dollars spent on retargeting consumers will soon no longer be optional. "In another two years, retargeting starts to become a line‐item budget for marketers out there," says Little, arguing that marketers who fail to retarget consumers who've already expressed some sort of interest is akin to leaving money on the table. "Staying in front of them is hugely important because you've already made the investment. You've already paid themajority of the money to get them there. To not continue that investment to get them to convert is a waste."

As BT metrics improve and success starts to be measured in terms other than clicks and conversions, Datran's Knoll says the industry will start to see more ad dollars shift online. "That will allow the biggest advertisers, who spend the most money and currently spend it on TV and other mediums, to take their money off the sidelines and bring it online," he says. "I think that will ultimately allow the web to realize its potential."
Switch from a push to a pull mentality

Finally, one of the more interesting predictions for the future of BT came from Lotame's Monfried, who specializes in social media. It has to do with how he believes consumers will ultimately behave online, which will in turn affect how behavioral and contextual information is collected and used. Monfried envisions a day when consumers no longer surf the web, but the web comes to them via their online "clouds." From these clouds, consumers will be able to dial in how many degrees away from their main interests they wish to stray.

"The way we see it, the trend is that there's going to be a massive change from the push mentality, where people are pushing data on you, to the pull mentality," Monfried says. "What that means is you won't have to surf the web anymore. Everything is going to be pulled onto your page or into your cloud, so you won't have to go to all these different websites anymore. There'll be affinity groups, and the term "website" is, I think, going to be antiquated."

To read on the web click here: iMedia Connection

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