In recent years, audience fragmentation has forced the advertising community to revise its thinking about delivering messages through mass communication channels. Changes in web technology and consumer behavior has, in many cases, increased opportunities to target advertising, yet how to make the most effective use of them has proven to be more elusive. The purpose of this thesis will be to understand the implications of this shift for consumers and industry; identify meaningful metrics; search for innovative practices in the field; and investigate potential role of social networks, branded utilities, cross-platform targeting optimization, learning styles, and semantic web in the next generation of targeted advertising.

On Monday, Online Media Daily reported that Revenue Science, a behavioral targeting (BT) marketing firm, called for participants in an initiative it is calling the Behavioral Targeting Standards Consortium (BTSC), a group of industry practitioners and thought leaders that would define BT, set standards for data collection and use, define best practices, and identify some common metrics.

What does that have to do with convergence culture? I would argue quite a lot.

I am writing my thesis at MIT Sloan on targeted online advertising, so I have spent the last several months delving into the technology, techniques, issues and potential of the practice of BT. I am an MBA student, so my focus has been on the business and regulatory implications, but I would argue that, particularly as BT gets more sophisticated and the technology we use enables it to reach us through the internet on our computers, mobile phones, and perhaps eventually our televisions and other devices we haven’t imagined yet.

Advertising is ubiquitous in modern life, and has always been a fundamental part of mass media and entertainment industry economics, as has measuring and understanding audiences in order to couple advertising and content in a way that will attract their attention and generate sales. BT, however, enables a whole other level of targeting, based not just on what content is accessed, but on inputs provided by the audience itself on what they are interested in. It moves the currency of the media and advertising symbiosis from masses of eyeballs to smaller groups with specific needs and preferences, altering the message and potentially the medium.

The impact of BT is that advertising placement will respond not to the context of the medium, but to the context of how we engage with it.In other words, the cultural implication of BT is a shift in our relationships with advertising, advertisers and content – ultimately, how we experience media.

What is it?
One of the goals of the BTSC is to define what behavioral targeting is, but, until they do, I’m looking at it as a method of targeting advertising messages by segmenting an online audience based on their interaction with content online, meaning which sites they visit, links they click, searches they enter, purchases they make and what time of day they access the internet.

I’ve talked informally to a few people in the last few weeks about their experiences with BT. The most common examples they can think of are seeing ads for low airfares to a particular destination an hour or two after looking at prices, or seeing ads for products and services that relate to a recent search. Some were delighted, some were curious about how it happened, some thought it was “creepy”. It was interesting that Amazon.com’s practice of recommending products based on recent searches and purchases was not mentioned by any of the people I talked to, most Amazon customers – my hypothesis there is that because most of the targeting is done in the context of the Amazon site. What seemed to really attract attention, positive and negative, was the length of time that elapsed between looking for particular information or content and seeing an ad in a different context.

Relevance vs. Privacy: The controversy
Depending on who you ask, BT is about serving relevant ads for the benefit of consumers or a form of clandestine monitoring that violates their privacy. In December, the Federal Trade Commission (FTC), after a series of consultations, released a report called “Behavioral Advertising, Moving the Discussion Forward to Possible Self-Regulatory Principles“, which outlined some proposed guidelines around consumer notification, permission and control, as well as use, and storage, and security of data. It also opens the question of what data might be off limits for this purpose (i.e. medical data, children’s activity) and requests feedback on what might be considered “sensitive data” that should not be used by marketers. There is also the question of what defines data that makes individuals personally identifiable or provides useful information about them without revealing their identity.

From what I could gather, neither consumer advocacy groups nor industry practitioners were particularly happy with the FTC’s position on these issues, which may have spurred the creation of the BTSC.

Audiences and Consumers: The real decision-making authority
BT is a new practice, but it ultimately leads us back to questions similar to the ones asked about advertising more generally. How do we reach the right people at the right moment? What makes advertising compelling on particular platforms? What is the line between relevance and intrusion? How disruptive do ads need to be to gain attention? When do ads become irritating rather than entertaining? And the big question: how do we measure it all?

Ultimately, as many journalists, academics and practitioners have suggested, we are now in an era of unprecedented consumer choice and influence. The audience will decide the answers to these questions over time, and as usages and practices around various internet technologies evolve and become part of cultural practice. They will ultimately decide how much control they want to have over who can observe their activity online and how much privacy they will trade off for convenience, as well as when and how they want to see, respond to, and use advertising. The debates that are going on now among regulators, industry, and advocacy groups are interesting, necessary and fascinating, but now more than ever, understanding first hand what types of content and advertising motivate and engage consumers will be crucial for everyone involved.

Targeting isn’t a new concept at all – marketers and advertisers have been finding ways to segment audiences for decades. What makes targeting in the context of the web so interesting to me is that it offers opportunities for near mass personalization from a variety of different angles and media formats in a very short period of time, and the capability to get real time data on how users respond to those changes. The flip side is the privacy issues that arise from those capabilities, which I will talk about in later posts.

I’ve divided online targeting into four categories:

1. Geographic, where advertising messages are presented to users based on their estimated geographic location, derived from their IP address.
2. Profile, where advertising messages are presented to users based on “traditional” demographics like age, gender, or geographic location, or on other self-descriptive information they may have entered in an online profile, such as interests, hobbies, favorite films, vacation plans, etc.
3. Contextual, where advertising messages are presented on a site because it is complimentary to the content of the page being viewed. Examples include putting ads for cable packages on electronics sites that sell televisions, or hotel ads on flight booking pages.
4. Behavioral, where advertising messages are displayed based on a user’s online actions, which could include what links they click, what time of day they are online, what sites they visit and how often, what search terms they enter, what they buy, and how much time they spend on a site.

If you follow this field at all, you probably know that behavioral targeting is the “hot” form right now that is getting a fair amount of press right now. There definitely is promise in analyzing behaviors to determine the intentions and motivations of a user, but I would content that targeting becomes the most accurate when we can effectively mix and match these techniques based on the behavioral data.

In my next post, I’ll elaborate a bit more on these categories, how they are related, and where the data for each can be derived. Thanks for reading, and please post any comments or questions.

General overview

In the last several years, fragmentation of audiences has forced much of the advertising community to revise its thinking about delivering messages through mass communication channels. As new media forms have emerged that enable interactive search, collaborative filtering and social networking among consumers, so have opportunities to target advertising, yet how to make the most effective use of these tools has proven more elusive. The purpose of this thesis is to review past and current practices in targeted advertising, understand consumer motivations and attitudes about privacy and ubiquity of ads, and project future trends and directions for designing and targeting personalized advertising content.

At the moment, I’m working with an outline that divides the document into eight parts:

1. Introduction and Overview

a. What is targeted online advertising?
b. Why is this subject important? Why now?

2. History & background

a. Timeline and trends since mid-1990s
b. Evolution of types of targeting, origins of theory and industry approach
c. Consumer behavior on the web, the importance of relevance and cognitive processing of ads online

3. Targeted online advertising today

a. Users and providers of targeted online advertising – an overview
b. Technologies and platforms
c. Perceived benefits of targeted advertising
d. Consumer experience
e. Integration with broader marketing and advertising campaigns
f. Issues and drawbacks of using these techniques

4. Metrics & outcomes

a. Metrics and success indicators
b. Consumer and press reaction (brand impact, sales impact)

5. Regulation and privacy

a. Key issues in the U.S. market – privacy laws, FTC involvement and self-regulation initiatives

6. Case studies of non-U.S. markets – May include Ireland, Poland, U.K., China, Japan – still deciding which ones would make the most sense

7. Future outlook

a. Will certain types of targeting become more prevalent?
b. What does the regulatory landscape suggest?
c. How big a part of advertising spending may it become, relative to other media?
d. What could technological change affect?
e. What will it be like to be an agency? An advertiser? A consumer?

8. Conclusion

I am expecting that parts 3 (current state), 5 (regulation and privacy), and 7 (future state) will be the key parts of the document, and the ones that require the most research and development. I also think they will be the most interesting and challenging to write.