Pandora’s Geo-targeted Ads Latest Example of Online Advertising Beyond the Banner

There’s been quite a lot of talk lately on how some Web publishers are moving beyond standard banner ad formats in favor of customized units as a way to increase viewer engagement and clicks. And no wonder with click-through rates for standard IAB banner formats on the decline across many properties.

One big shift, especially among social media sites, is to integrate ads squarely into page content as opposed to on the periphery of a page like most banner units. For example, social news site Digg just recently began flowing ads into the stream of its page content as a way to increase subscriber interaction.


Another good example of this is music service Pandora.com’s placement of ad units squarely into its music player. But Pandora is taking it a step further by adding geo-targeting to the matter.

For example, this morning while logged into Pandora an ad was served up by the Paper Mill Playhouse, which is several blocks from my house, for the musical play “The Full Monty.” Obviously I was targeted for this ad based on IP information from my browser.

I could only wonder if they are also using information about my music preferences (which as a subscriber is stored in their databases) as a way to serve up ads that would be of interest to me. For instance, knowing I like indy rock an ad for “The Full Monty” makes sense – but for "South Pacific," probably not. Some might think this is a little creepy – I don’t, just a way to deliver more relevant and useful information.

Google’s New Behavioral Targeting Service - a Step in the Right Direction on Privacy Issue

A few weeks ago I posted about the pressures being put on online advertisers, and the Web sites that run their ads, to address the growing privacy concerns around behavioral targeting.

http://marketingmemes.blogspot.com/2009/02/online-advertisers-need-to-get-serious.html

Now, to liven up the debate, Google announced last week that it will be launching a beta-test of its own behavioral targeting service on AdSense partner sites and YouTube.

http://googleblog.blogspot.com/2009/03/making-ads-more-interesting.html

Google is not referring to the service as “behavioral,” but instead is calling it “interest-based” advertising. From what I can tell, the beta service will offer two of the more common ad targeting techniques:

• Behavioral – where an inference is made regarding a Web user’s interests based on the Web sites they visit
• Retargeting – the re-marketing to an online consumer who has shown previous interest in a product or service, but for some reason never followed through on that interest

These techniques are no different from targeting approaches used by other ad networks. That said, what is different about Google’s service is the proactive approach they are taking to address some of the concerns about targeted ads raised by privacy advocates. For example:

1. They will be expanding the number of formats and publishers that allow users to click on targeted ads served up by Google for detail on the information that was used to deliver the ads and how that information was collected
2. Users will be give the means to view, delete or add information about the types of ads they would like to see through a tool called the “Ads Preferences Manager”
3. They will be providing users with an easily accessible way to opt-out of future targeted advertising

In Google’s own words, their approach gives users “transparency,” “control” and “choice.” Hopefully, these steps will quell some of the rumblings from privacy advocates who have been calling for greater regulation of the online ad industry which is the last thing we need in the middle of a recession.

The Online Ad Industry Needs to Get Serious About Privacy

In a previous post I discussed dynamically generated display ads and how they represent the next wave of innovation in online advertising.

http://marketingmemes.blogspot.com/2009/02/now-appearing-at-browser-near-you.html

Unfortunately, this next round of innovation is potentially in jeopardy. A critical component of this evolving online ad model is a technique known as behavioral targeting (BT). BT involves making assumptions about a person’s interests based on things like the Web sites they visit, their profiles on social networking sites and the types of things they search and then serving them customized ads based on those assumptions.

FTC's 2007 Guidelines
While the data used by BT methods is anonymous, there is still quite a bit of controversy around the technique. Privacy groups criticize it as intrusive (if not creepy). And the Federal Trade Commission has been keeping an eye on BT since December 2007 when they issued voluntary guidelines to Web sites delivering targeted ads in an effort to protect consumer privacy.

Apparently, no one was listening. Last week the FTC issued a follow up report on the issue. The report reinforced the FTC’s commitment to industry self-regulation (i.e., voluntary compliance) but this time added tough words for the online ad industry which it claimed is not moving fast enough to address the privacy issues. They also commented that if the industry does not make substantive efforts to address these concerns regulations or even legislation might be required.

http://www.ftc.gov/os/2009/02/P085400behavadreport.pdf

Concerns with Current Privacy Practices
Privacy groups and the FTC have a host of grievances with current targeted-ad practices:

• They don’t clearly explain what information is being collected and how it is being used
• The explanations are not easily accessible and are normally buried deep in lengthy privacy policies
• They are not convinced that the data collected is completely anonymous
• They are concerned that Web sites are combining personally identifiable data (addresses, birth dates, etc) with anonymous data captured through BT methods

What the FTC is Requesting
The FTC report laid out guiding principles for Web site privacy practices including provisions for:

• Clear, accessible and plain language statements about the behavioral data they’re collecting and how it will be used
• An easy way for consumers to opt-in or out
• Security policies for collected data
• The length of time data will be retained considering legitimate business needs

The report was not specific regarding the types of notice Web sites should provide to consumers. Some have proposed links on banners that lead to an explanation of the data collected, how it will be used and opt-in and opt-out features.

Regulation and Innovation – Rarely a Good Combination
eMarketer is projecting a 300% spending increase in targeted online advertising in the next three years – strong growth in a down economy. A lot of this growth will depend on investments Web sites make in new technologies to enable more sophisticated ad-targeting.

The last thing we need is for the government to dampen that growth by imposing a set of onerous regulations. The online ad industry has a clear choice: figure out a way to improve online consumer privacy notifications or the Federal government will figure it out for us.