The Rhetoric of Behavioral Targeting

by Mielle Sullivan, Janus Networks

In March, I wrote a piece about Google’s behavioral ad targeting and possible legislative action in the works to insure customers understood Google’s (and other advertiser’s) privacy policy. There is still not a bill on the table, but congressional hearings were held in mid-June and Rick Boucher (D-Va.) has been vocal about his plans to draft a bill. Although, Boucher insists: “My overall purpose is not to interfere with the legitimate practice of people who are doing targeted advertising. My goal is to try to create a greater sense of confidence on the part of consumers.”

The definition of what exactlyA qualifies as behavioral targeting varies across the industry. Some companies that claim to offer behavioral targeting, really only offer vague demographic information. Also it is unclear if retargeting (ads based on a users visit to an advertisers site) is considered behavioral targeting by legislators.

Opponents to regulation of behavioral targeting argue that it could “cripple” the online advertising business. I think this is a bit hyperbolic. It might be true if retargeting is outlawed, which is unlikely because it requires the collection of only one piece of information. True behavioral targeting requires following a user across several sites, and represents a relatively small but growing percentage of ads. Advertisers selling high price-point items like cars or travel packages use behavioral targeting the most. For the majority of advertisers, it is still unclear if behavioral targeting is worth the premium. Perhaps as the technology improves, it will become more of an advertising mainstay.

Having said that, the the cost of online advertising inventory was plummeting before the crash, and with cutbacks in ad budgets, even a small change in the industry could impact a lot of businesses. The businesses most scared of this legislation are ad networks. Google has its own ad network, as does Yahoo. They sell billions of dollars worth of “remnant” publisher ad space. Ad networks, rather than the advertisers or publisers, do the actual behavioral targeting in most campaigns. Limiting behavioral targeting would definitely cause them to rethink the way they do business.

However there is another, quiet trend in the industry that may one day replace ad networks as they are now. Advertisers and agencies know that ad networks function as a middleman between them and publishers and they would like to have more direct access to remnant inventory. Ad exchanges give advertisers direct access to impression by impression inventory for purchase through auction. Right now, ad exchanges are still an emerging platform, but if they gain popularity, they would decrease the relevancy of ad networks. That doesn’t mean behavioral targeting would go away, but it may become less attractive to advertisers if they can target remnant impressions more precisely.

In conclusion, congress and the FTC continue to debate regulation of behavioral targeting while the online advertising industry attempts to standardize a definition and develop practices to polices itself. Though true behavioral targeting currently represents a relatively small percentage of impressions, regulating would adversely effect some advertisers, agencies and especially ad networks. However, behavioral targeting is only one set of innovations emerging in online advertising and other technologies may make it less desirable.

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