Online behavioural advertising around the world

Richard Sharp, managing director of media, head of trading, ValueClick

As with all new technologies, keeping an eye on their impact to existing markets is key. Online behavioural advertising still remains more relevant to some countries than others. However, the market that we can really learn from is the US, which has historically led in the digital marketing space. In the US interest continues to grow, with marketers increasingly viewing OBA as an effective tool to improve their advertising.

As with all new developments online, adoption by the market can be a slow process, affiliate marketing is an example of a channel which entered the market tentatively despite its performance-based model and took years of education before marketers began to see it as a necessary part of the online marketing mix. OBA looks set to follow a faster pattern. Targeting specific audiences based on their interests rather than merely the current context of a publisher page was a radical change to the focus of media buyers, such that adoption rates have been surprisingly rapid. Looking at the behavioural targeting advertising spend report from eMarketer US (June 2008) we can see already that spending has increased from 7.2% in 2006 to a predicted 11.4% of online advertising spend in 2009. Looking forward spend is expected to increase even further, reaching an impressive 23.4% by 2012.

Trends in the US

What remains one of the current challenges is that the majority of the US market still sees OBA predominantly as re-targeting, which is a trend that we are starting to see in the UK also. While some media planners are familiar with cluster-based approaches to OBA, few are aware of the differences between this and the manual business-rules or the predictive approach. This indicates that there is still a job to be done in terms of defining the different types of BT and educating the industry about the different approaches.

Of course, there have been some early adopters who are recognising the value that the different types of OBA can bring to their businesses. The fact that they consistently pay three times as much to have user retargeting, and five times as much to have predictive targeting vs. their non-OBA campaigns validates the return on this investment.

Another challenge facing OBA adoption around the globe is the controversy surrounding online privacy. The emergence of ISP-based behavioural advertising business models rightly sparked the industry to improve their self-regulatory guidelines. If we look at the ability of behavioural advertising to specifically target people’s interests, there is the potential to eradicate a huge proportion of irrelevant advertising from the mix which, in turn, improves marketers’ ability to better communicate their brand and to engage with the right audience at the right time.

Initiatives to address privacy issues

In the US there are a number of examples of good practice aimed at addressing privacy issue. For example, the Network Advertising Initiative (NAI), a cooperative of online marketing and analytics companies, established and recently revised its self-regulatory Code of Conduct for ‘third party’ online behavioural advertising. For further details see www.networkadvertising.org.

More recently a coalition of US bodies across the advertising ecosystem, including IAB US, published a set of seven principles. These complement, where appropriate, IAB UK’s Good Practice Principles, in particular the emphasis on transparency, consumer control
(choice) and education. For further details see here.

These principles will also be reflected in a good practice framework at EU level. The concept of ‘enhanced notice and choice’ is important to the future of all internet advertising. Whether consumers need to be given notice about data collection and the ease by which they provide the choice to ‘opt-out’ is an issue that we need to define globally.

If European legislation rules that IP addresses are in fact Personal Identifiable Information (PII), and the US rules that while IP addresses are unique identifiers like cookies, they are not PII, then we run the risk of stifling innovation in Europe that could otherwise provide tremendous benefits to consumers, publishers and advertisers alike.

From looking globally at OBA what we can learn is that it is crucial that we work together as an industry and with local regulatory bodies to standardise the practices of online data collection and use. It is imperative that organisations abide by these regulations, and that we work together to instil confidence in consumers concerning any privacy issues, so that no matter where in the world a user is they understand what data is being collected and by whom it is being collected. As well we need to ensure that we work together to educate the market wherever possible about OBA, the different types that are available and most importantly about the distinct business benefits that it can have. This is a very exciting technology and one that is likely to drive the future of online advertising, provided that we all play by the rules.

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