Look Out!

Last night you read on your local newspaper’s website about how gas prices could reach $4 a gallon this summer, so you went to a car site to check out some reviews about hybrid vehicles and then visited an automaker site to learn about the car prices. This morning when you checked your email, you saw two ads for hybrid cars.

Did you think – wow, this relevant ad sure is handy or, yikes, Big Brother is watching my every move?

This question is at the crux of an issue that has ignited privacy advocates, who fear that recent acquisitions in the online advertising space will make profiles of consumers more complete and enable behavioral targeting (BT) to become more extensive.

In April, Google announced plans to purchase DoubleClick, an ad-serving service and owner of affiliate marketing network Performics. Following on Google’s heels, Yahoo announced it would complete its purchase of RightMedia, which operates an exchange for trading digital media. Then in May, Microsoft said it would buy aQuantive, which operates a variety of online advertising businesses, and the marketing services company WPP announced its intention to buy ad network 24/7 Real Media (see cover story page 44).

These deals, which vastly increase the amount of knowledge that Google, Microsoft and Yahoo have about their users’ behaviors, validate the speculation that widespread BT is just around the corner.

BT is not new. Microsoft added BT to its AdCenter in 2006, AOL has been using BT technology from Revenue Science, and Yahoo has its own proprietary BT solution. Ad networks have thousands of website clients, and segment the audiences into categories such as car buyers and health food buyers, based on anonymous user activity.

Privacy advocates are concerned that the recent acquisitions will enable Google, Yahoo and Microsoft to construct a full profile of a user’s online behavior, from their initial search all the way through to the time they close their browser. Advertisers that want to discriminate among customers could use these records of user behavior improperly.

Google and DoubleClick

Most of the hullabaloo about privacy concerns is focused on the DoubleClick acquisition because Google, which tracks user search queries and history via user IP addresses, has the lion’s share of the search market. Meanwhile, DoubleClick, which tracks users via cookies associated with graphical ads it serves, has a similar advantage in ad trafficking.

Mark Ward, software engineer for RevCube, a provider for multichannel online ad campaigns, explains that before the acquisition, Google’s behavioral data essentially stopped when the user left the search result page. “Now, if a user stays on major sites [assuming DoubleClick is on the site the user browses] and uses Google to search, it’s conceivable that Google/DC would know what page the user was on, when the user was on it, where the user was coming from, etc., for every page the user ever browses.

In the past, Google, whose famous mantra is “don’t be evil,” has indicated that it would not track its users’ behavior to develop powerful targeting capabilities for display ads because it doesn’t want to snoop on its users. But some believe Google will embrace BT because they are under pressure to find revenues beyond text-based search ads; others say Google bought DoubleClick so they can compete in the display game; and others say it was simply to prevent Microsoft from buying DoubleClick (and still others say it was a combination of several factors).

Google has denied claims of any intent to do wrong. At Google’s annual stockholder meeting in May, Google co-founder Larry Page said, “Our actions over the next 10 years will make it clear we’re not the same kind of companies as you are worried about.” And CEO Eric Schmidt added that the company has “made a commitment not to track user data.” Some point out that if Google wanted to focus on BT, they would have bought Revenue Science or Tacoda, which specialize in it.

But Jeff Chester, executive director of the Center for Digital Democracy (CDD) in Washington, D.C., says that, “Google’s entire business is about personal data acquisition and use.” As it increasingly provides an array of third-party [rich media and interactive] ads, especially for major advertisers [which it is seeking], it will use our data in sophisticated ways to market to us. Google – no matter how high-minded its mission – is ultimately a digital marketing company.”

Publisher of AffiliateFortuneCookies.com Sam Harrelson agrees that Google is already doing BT in an oblique way that ascertains the end user’s browsing habits, click choices and attention data. He says programs such as GMail and Google Reader are giving Google a great deal of quantifiable data on individual (or generic) user habits and how those users browse. “The addition of DoubleClick’s data only solidifies that ability to measure beyond the click or the impression,” says Harrelson.

Privacy advocates are not the only ones considering the profound impact the DoubleClick acquisition will have on the industry as a whole. Chester says that in addition to threats to privacy, “GoogleClick” will become the most powerful media company online, able to handpick the winners and losers of e-commerce. “Instead of robust competition, we will have dot-consolidation.”

RevCube’s Ward agrees and says that the DoubleClick acquisition should make people nervous because Google could become a monopoly that can do every part of online marketing.

The DoubleClick acquisition would give Google a network of publishers and advertisers that provides a vast amount of visitor behavior data to use to target ads across its network. This makes other ad networks worried because Google would be their direct competitor.

Some believe that the DoubleClick acquisition would reduce competition by giving Google 80 percent of the marketing for serving ads to third-party Web publishers.

Harrelson says that ad networks need to continually adapt to the marketplace and not become obsolete in their business model or place in the food chain. “If ad networks are not fastidious in their outlook, this could very well happen as Google, Microsoft and Yahoo continue to chip away at the once-separate performance marketing space.” Ali Mirian, product manager of publisher solutions at 24/7 Real Media, says there are publishers who consider Google to be a major threat to their advertising business – the data that they would run through the DoubleClick system would now be in the hands of Google.

Another disadvantage for affiliates and search marketers is the potential of increased cost per click (CPC). Affiliate Colin McDougall speculates that if Google acquires a lot of information about visitor behavior from initial search through to the shopping cart checkout, it could have an impact on CPC. “Rather than the competition setting the price in the open market bidding system that currently exists [i.e., AdWords], the base bidding price algorithm might get tied more to conversion rates than what the marketplace is bidding.” Harrelson points out that a benefit for affiliates will be a streamlined and automated process for dealing with agencies. He explains that affiliate marketing works best when the ease-of-use factor is higher than the time commitment factor. He sees the DoubleClick acquisition and others opening up the playing field of “affiliate marketing” to many more nontraditional affiliates in the social media and blogging spheres.

Consumer Pros and Cons

Critics say that consumers should be concerned that more complete user profiles will mean that relatively anonymous usage data could be leveraged to link a pattern of behavior to a consumer’s identity and that cross-campaign learning could be used to infer private information, such as sensitive health data.

CDD’s Chester says consumers’ privacy will be further at risk because Google will be in the position to track the majority of consumer actions online including through cell phones. “Such data mining will enable Google to have unprecedented insights into consumer behaviors and expenditures.”

As a result of a complaint filed in April to the FTC by privacy groups including the CDD, the FTC created a special task force and opened a preliminary antitrust investigation at the end of May. Chester says, “The building pressure will result in some policy change ” BT is inevitable – but policy safeguards will be a part of it in some area.”

But not all consumers are worried about giving up their privacy. According to the results of a ChoiceStream Personalization Survey conducted in 2006, the number of consumers willing to allow websites to track their clicks and purchases increased 34 percent from the previous year.

However, the results show no significant decline in the number of consumers concerned about the security of their personal data online, with 62 percent expressing concern in 2006 versus 63 percent in 2005.

“Consumers are starting to become more open to the idea of giving up some privacy in return for a more customized search experience,” says Marketing Pilgrim’s Andy Beal.

However, there must be a tipping point on the curve where the average consumer will start to feel as if their privacy is being disproportionately traded for personalization, “but we are nowhere close to that yet … even with platforms such as Google’s Web History,” AffiliateFortuneCookies’ Harrelson says.

Of course many online marketers are quick to point out that consumers benefit most from an increase in BT. Kevin Lee, executive chairman and cofounder of Did-it.com, a search and auction media agency, says that as targeting improves there will be less untargeted advertising and more advertising that is truly relevant to the consumer, be it text links, banners or video.

And many believe that Google will use the “if you are going to see ads, they might as well be relevant” approach because the customer-centric message complements Google’s brand.

The Ick Factor

But even if consumers do want more relevant ads, it doesn’t mean that they won’t find it disconcerting if the same ad for an MP3 player follows them from site to site. The creepy factor could risk consumer trust – which would tarnish a brand’s reputation – and therefore be a substantial risk for merchants.

Because a privacy incident could damage everyone in the advertising food chain, publishers, ad networks and advertisers are going to have to be clear to consumers that their privacy concerns are absolutely valid and that steps are taken to build safeguards into their systems. Lee says that a controversy could ensue if an ad network doesn’t adequately disclose that ads are being targeted behaviorally.

Ad networks insist they only collect anonymous data, which then is aggregated and analyzed to segment the user into one or more Internet archetypes, such as “car shopper” or “dog lover.” And ad networks are explicit in explaining what data is collected and how it is used and that they give users the option of opting out.

DoubleClick and aQuantive say they give users the ability to opt out of having data collected about them, though privacy experts argue that few people know they have that option.

In an effort to come up with a solution, the NAI, which is a cooperative of online marketing, analytics, advertising and email companies, developed the site at NetworkAdvertising.org. It is a centralized tool that allows users to verify which ad networks have placed a cookie on their hard drive and then users can submit opt-out requests for each network they prefer not to be targeted by.

It’s possible that government regulation could halt BT, at least temporarily. If that doesn’t happen, Marketing Pilgrim’s Beal says that BT implementation will likely be slow and steady to avoid any missteps that could impact the trust built up by the search engines.

Some experts believe there will be a fundamental shift from contextual targeting to BT. Revenue Science’s Basem Nayfeh says behavioral targeting changes the discussion from whether an advertisement is relevant to the content to whether an advertisement is relevant to the person reading the content.

ValueClick, an online advertising behemoth rumored to be an acquisition target, is advocating the adoption of 3D-BT, which would deliver a personalized message across multiple channels. John Ardis, vice president of corporate strategy at ValueClick, explains that 3D-BT is needed because current BT focuses only on display advertising so targets are sent messages that are relevant in display, but appear depersonalized and generic in email and on the marketer’s website.

Regardless of privacy issues and government intervention, there is too much money to be made by targeting consumer’s habits for BT not to evolve – even if those involved need to tread very carefully.

Search Is Getting Personal

Your phone rings. A good friend is calling, more excited than you’ve heard her in months. “My book is on the home page of Amazon! I can’t believe it. My book was just published last week and already it’s on Amazon’s home page!” Exciting? Maybe not to someone who knows how Amazon works. Your friend has seen her book on her version of Amazon’s home page, but a closer look shows it under “Items Recently Viewed.” She views her book’s page each day to check any new reviews. Based on what books she looks at, Amazon thinks she’s very interested in buying this book and places it on her home page. But it may not be on anyone else’s Amazon home page.

That’s how personalization works. Each person sees something different even though everyone is looking at the same page. We’re used to seeing personalization on Amazon, but now it’s coming to a search engine near you.

Inside Personalized Search

So how can search be personalized? By showing each searcher different results. Just as Amazon shows different content on its home page for different people, a search engine can show different content on its search results page, even when two searchers look for the same keyword.

Why do this? Money. Personalization can be lucrative for search engines. If personalized results are more relevant results, then searchers are happier and search more. And if search marketers can target ads to the right people, they’ll pay higher per-click prices.

Search engines have personalized paid results for years, using geographic targeting. With geographic targeting, a furniture store, for example, that delivers within 25 miles of its location can purchase the keyword furniture but ask the search engine to show its ad only to searchers within the delivery zone. Search engines check the geographic location of the IP address for each searcher’s computer to decide whether it is within the geographic zone or not. Paid search marketers can set geographic limits on city or zip code boundaries, or sometimes even by longitude and latitude coordinates.

Search engines are now extending personalized search beyond geography. MSN Search pioneered personalization using searchers’ demographics; all search engines will eventually offer similar programs. With demographic targeting, search marketers can raise their bids for searchers based on gender, age or other characteristics. So, you can raise your normal per-click bid 3 percent for women over 65, if that’s your highest-converting market.

But how do search engines know which searchers are women over 65? They need searchers to tell them. That’s why Google, MSN, Yahoo and other search engines are racing to provide services that entice searchers to identify themselves. Whenever people register with one of these companies, they provide demographic information that the search engines can use to personalize searches.

In personalization parlance, demographic targeting is called explicit personalization, because it’s based on information explicitly provided by the Web user, such as age. Expect search engines to also engage in implicit personalization, changing search results based on searchers’ behavior, such as what kinds of Web pages they look at.

Implicit personalization may eventually prove more valuable than explicit personalization, because so much more information can be gathered. Search engines can observe which results people click when they search, discerning patterns that allow them to rank their favorite kinds of pages higher for all their searches. If a particular searcher regularly clicks product reviews rather than manufacturers’ specs, Google could begin to rank product reviews higher when he’s searching for product information.

Search engines have other ways of observing implicit behavior. Google can analyze the message text of its Gmail users to see what subjects they write and read about. Yahoo can look at the keywords used by its search toolbar users, and even see what pages they look at. You should expect search engines to use this information to personalize search, both for paid and organic. Search engines are always looking for ways to improve relevance – the match between searchers and content. High relevance means the search results correlate closely with what the searcher has in mind. For 40 years, search engines have improved content analysis to increase relevance. Personalized search concentrates on the people side of the relevance challenge instead.

Inside Personalized Search Marketing

Now that you understand the basics of personalized search, you may want to know how search marketing will change.

One change is obvious. Personalized paid search bidding is more complex, because search marketers must consider geographic location, age, gender and other demographics when they make their per-click bids. Instead of different bids for every keyword, now you need different bids for the same keyword.

You should raise your bids for targeted demographics only because they convert at higher rates. To bid effectively, your Web metrics system must track conversions by geography and by demographics, not just by keyword, and your bidding software must adjust based on those metrics.

Less obvious changes will confront us when search engines begin applying personalization to organic search. Search marketers have always wanted to achieve the No. 1 ranking for their favorite keywords. But what does it mean to be No. 1 in a personalized world? If the organic results are personalized, then different searchers get different No. 1 results. Your excitement at being No. 1 will be no more warranted than your author friend’s glee at making Amazon’s home page. In a personalized search world, every site can be No. 1 with some searcher sometime.

Widespread personalization will doom traditional rank checking. The question won’t be, “Does my site rank No. 1?” but rather “For what percentage of searchers does my site rank No. 1?” or “What was my average ranking yesterday?”

And who can answer those new questions? Only the search engines themselves. Only MSN will know where your pages ranked for every search performed with their search engine, so only MSN can tell you. Will the search engines provide that information for free or will they charge you for that analysis? Will search engines tell you the demographics of the referrals that come to your site? Time will tell.

Optimists also believe personalization will reduce the problem of search spam. The thinking is that spam is all about content, so that personalizing results based on searchers makes it exponentially harder to spam the search results (because spammers must then fake their content for many kinds of searchers). By increasing spammers’ costs for the same number of searchers, it takes part of the profit out of these unethical techniques.

No matter its effect on spam, savvy search marketers must stay on top of the personalized search trend – it’s the biggest change in search marketing since paid search. If you focus on who your best customers are, and you craft your content to match, you’ll be ready when the personalized search revolution breaks out.

MIKE MORAN is an IBM Distinguished Engineer and product manager for IBM’s OmniFind search product. Mike is also the co-author of the book Search Engine Marketing, Inc. and can be reached through his website (mikemoran.com Posted on Tags , , , , , ,