Let’s get personal: Advances in online advertising

We are defined by the advertisements we see.

Just as the books on our bookshelves or the clothes in our closets might be indicative of Who We Are, the ads we encounter — especially online — can say a lot about us. That’s because companies are beginning to look in our interactive sock drawers and creating personalized advertisements based on what they find.

More than ever marketers and corporations are gathering data on us. They keep tabs on the web pages we visit, track the purchase history of our credit cards, scan the contents of our emails, and then use this information to make advertising systems capable of targeting individual consumers. Increasingly, these tailored ads are proving to be the most effective way of reaching prospective buyers.

As advertising gets more personal, our privacy may be threatened. But, according to Mike Zaneis and other advertising industry experts, consumers are complicit in aiding these advances.

“The advertising is a by-product of wanting our online content for free,” said Zaneis, vice president of public policy at the Interactive Advertising Bureau, an organization that helps to develop standards of practice for online ads. “You get free email accounts, free news services, Facebook, MySpace, YouTube…The only way to get content free is through relevant advertising.”

In this context, “relevant” advertising is a loose synonym for personal advertising.

For example, on Gmail — Google’s email service, which has tens of millions of users — every piece of correspondence is automatically scanned, and advertisements based on the contents appear in the margins of the screen. I sent myself a blank message with the word “Travel” in the subject line; when the email appeared in my inbox two seconds later, an ad came up saying: “Fly First Class. The people up front don’t have the money. They have the brains,” with a link to First Class Flyer magazine.

Certainly, there are benefits. Consumers are far less likely now to see ads that won’t interest them. A 2006 study conducted by the Ponemon Institute and Revenue Science found that 63 percent of consumers prefer advertising based on their interests; 55 percent of those surveyed said that relevant advertising “improves” or “greatly improves” their overall online experience.

Beneficial as it may be for consumers, it’s doubly so for advertisers. They establish stronger links to their buyers, and because many formats follow the pay-per-click model, it ends up being more cost-efficient, too. The Interactive Advertising Bureau and PricewaterhouseCoopers found that, in the first quarter of 2007, Internet ad spending in the United States hit $4.9 billion, and project that by 2011 it will bring in over $35 billion a year.

Advertising in Bedlam
Google, which has the largest market share in online advertising, bases its program on AdWords — words and phrases that can be bought. When an AdWord appears in a Google forum — if it’s typed into a search, say, or is part of a Gmail email — the corresponding advertisement does, too. One could think of it as a giant game of “Wheel of Fortune,” where advertisers are contestants buying vowels (the AdWords), trying to figure out the daily clue (consumers’ search terms).

According to Google’s website, AdWords are on average five times more effective than untargeted banners. Furthermore, about 80 percent of Internet users in the United States encounter at least one AdWord ad a month. While words with the highest demand fetch premiums up to a $100 dollars per click, others can be bought for a penny.

The average price is on the rise, though. A study conducted by DoubleClick (an advertising firm that Google bought last year) showed that in January, 2007, there were six times as many keywords with a cost-per-click of more than a dollar than there were in January, 2006. It’s up to companies to determine how much they’re willing to pay, which in turn affects where and how often their ad shows up.

“Google lets the inmates run the asylum,” said John Risdall, CEO of Risdall Advertising Agency in New Brighton. Of more than 180,000 firms worldwide, RAA is the first organically listed on a Google search for the term “Advertising agency.” (When you Google something, two lists of results come up: The paid list of relevant ads, and the organic — or, unpaid — list of actual search results.)

The firm attributes much of its recent success to its Google ranking, and maintaining it is one of their chief priorities. But there are several factors that affect rankings.

“Time on the site, links to the site, quality of links to the site, appropriateness of links to the site, etcetera,” Risdall said, all determine Google ranking. “Any traffic you drive to the site will affect your position.”

One of RAA’s most effective strategies to boost hits has been to use AdWords. “We’re Google’s number one customer in Minnesota,” said Risdall. “In all we buy several hundred words, where we get over 50,000 impressions and 1,000 clicks and 50 leads per month.” (They pay between 25 cents and just under $2 a word.)

The clicks they get on their ads feed into the site’s overall popularity, which then propels it up the Google search list. Because RAA is relatively small (they’re only the seventh-largest advertising firm in Minnesota), without their ranking and online advertising that follows, Risdall explained, the firm would be invisible to the greater world.

What’s next?
In the early months of 2008, Google’s AdWord growth slowed for the first time since its inception. Just as with television or radio commercials, where it’s easy to hit a mute button or change the station, it seems Internet surfers are becoming adept at ignoring ads.

“The age old battle between buyers and sellers ended with the Internet, and the buyers won,” Risdall said. “Everything’s online, for free, and if you don’t want to look at something, you don’t have to.”

As a result, advertisers must work harder to retain our attention. One method has been to infiltrate our previously private spaces, like cell phones and email accounts.

CBS, for example, is developing a GPS-technology-based advertising system. Via text message, it will let you know what pizza joint or coffee shop is around the corner when you’re walking through town.

The holy grail
Comcast, meanwhile, is planning a cable box implanted with gesture-recognition capabilities. The cameras will be like those used by the Nintendo Wii, where they recognize human motions. However, the Comcast cameras will have “memories,” so that they’ll be able to “remember” users and will keep track of their preferences. Gerard Kunkel, Comcast’s vice present of user experience, called the device a holy grail, because it could be a step toward producing advertisements specific to the individual.

In chat rooms and on blogs, Comcast’s invention has produced a sizable backlash. “If you have some tinfoil handy, now might be a good time to fashion a hat,” wrote Chris Albrecht, who broke the story on his technology blog for NewTeeVee.

As long as it’s effective, though, this type of advertising isn’t going to go away.

“Online advertising is more than a 20-billion-dollar-a-year industry,” said Zaneis. “And that’s not going to change. All different media are moving into interactive space, and making their ads more relevant.”

There are boundaries, though. Certain privacy protection laws, Zaneis said, restrict access to financial data and health-care information, and there are limitations on sending ads to fax machines, emails and telemarketing.

John Risdall’s son, Ted, who is president of RAA’s interactive division, acknowledged that it’s up to advertisers to avoid becoming too intrusive.

“If the user sees your ad and thinks you’re invading their privacy, you’re opening the door to consumer backlash,” he said. “No company wants to ignite consumer uproar.”

This, he explained, more than any laws, which “are notoriously slow in being applied to the online environment,” will help regulate privacy infractions.

“There are people who feel their privacy is invaded right now,” said John Risdall. “But really, they can opt out. I’m going to assume that there’s always going to be the option to opt out for the consumer. Just like direct mail; you can choose not to be on a given mailing list.”

But opting out right now entails some sort of technological asceticism. If we want to use the Internet at all, we must reconcile the fact that someone or other is going to be tracking our activity, and using our apparent interests to fashion advertisements just for us.

Maybe the biggest illusion of the Internet isn’t that advertisers work slyly behind the scenes, trying to hide the fact that they’re there. Rather it seems the biggest misconception of the online world is that there’s any privacy at all.

Max Ross is a freelance writer in the Twin Cities. His work has appeared in Minnesota Monthly, The Rake, and Reveille, and he runs the books blog, “Cracking Spines” for rakemag.com.

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