Targeted Online Advertising

What is it and what are the benefits?

Tuesday, 1 July 2008

This transcript is based upon a speech given by Nick Stringer, head of regulatory affairs at the IAB, to the Internet Service Providers Association Legal Forum on 24 June 2008.

Introduction

Targeted advertising has been in existence in the online world for a decade or so. In the offline world, it’s been around forever and is evermore important in our everyday lives. People are demanding more personalised services and testament to this is the Government’s mapping of what’s happening in the private sector to public services, such as health, transport and education.

What is Targeted Online Advertising?

The online environment is ripe to deliver services that are tailored to our needs and requirements. Advertising is no different and can be tailored – or customised - using different information.

For example:

• Using demographic information, adverts can be shown to specific audiences using information such as age, gender and social class.

• Content can be tailored according to an individual’s location (eg a search for ‘bars in Sydney’).

• And it can be customised to your online behaviour – so showing adverts to large segments of users who have expressed interest in the same thing.

It’s important to note – particularly in relation to behavioural advertising – that there are a multitude of different and competing business models in this space. ISP-based solutions are only one model. Others – such as advertising networks or media owners - work directly with web publishers, agencies and advertisers to provide customised advertising across a single site or many different websites.

What are the benefits of Targeted Online Advertising?

There are many benefits of targeted online advertising – for consumers, business and UK plc. Advertising underwrites much of the content we view and services we use online today, giving consumers cost-free access to many benefits, such as:

• A rich array of content – news, business, entertainment etc;

• Communications services - email, chat, telephone services, video and photo storage and sharing to name but a few;

• Information gathering tools, such as search engines; and

• Social and professional networking environments.

Quite simply, without advertising, we would have to pay for these services, and they are a platform for individualism, creativity and innovation.

In the past, many consumers have taken online advertising for granted or say it gets in the way of their experience. A good example of this is pop-ups. However, targeted online advertising is changing this: making content more relevant and useful to consumers, their needs and requirements. A recent study in the USA found a significant increase of up to 35 per cent in consumer click-throughs on targeted advertisements. It makes a lot of sense: If I’m looking for a ‘second hand’ car to buy I’m going to be more interested in adverts on cars than for broadband.

This type of advertising is also delivering enormous benefits to business, particularly SMEs operating within the ‘long tail’ of the Internet. Relevant advertising drives web traffic to particular sites and this has helped build successful new businesses and commercial models. Small businesses are now able to gain a foothold on the Internet with extremely low barriers to content.

It’s also more beneficial for advertisers. They know that they are actually reaching users who have expressed an interest in the products or services they can offer.

Targeted Online Advertising in Anonymous

Unless you specifically sign-up for a service - such iGoogle or Yahoo! Mail - targeted online advertising is anonymous.

So – taking behavioural advertising as an example - no personal data (or personally identifiable data) such as your name, address, date of birth or email address is collected. More vanilla information about the expressed interests of users are grouped – so cars, finance, travel etc – and scored, and a random file (cookie) containing this score is placed on your computer. This enables relevant adverts relating to that score to be served to you.

But it’s not following the individual user. It’s collecting information from the sites that particular user – along with the groups of users who have expressed similar interests - visit most.

A couple of similarities from the ‘real world’:

• If you buy Model Railway magazine, within it you expect to see adverts for Hornby because the magazine publisher knows you’re into model trains/railways.

• Or – when leaving a concert one evening - someone gives you a leaflet advertising a Bruce Springsteen gig up the road a week later.

The IAB Approach

The IAB has a track record in addressing issues and developing self-regulatory solutions. In this space, we acknowledge the concerns related to behavioural advertising and the public perceptions about privacy. As a result, we have established an industry forum to discuss these and to explore how we can provide greater clarity to consumers.

We are looking at how we can inform consumers about how this type of advertising works, so they can understand it better and how they can choose if they don’t want to be part of it. Already there are ways for users to delete cookies from their computer. However, users need to understand that this may impact upon their online experience. For example, Amazon will not remember what books or CDs you bought and the Eurostar website may be in French. We need to make this easier for the consumer without distorting their online experience.

So we are also exploring ways to give users greater control over this process. This might be by way of something similar to the Telephone Preference Service here in the UK or the Network Advertising Initiative (NAI) in the USA which gives users the choice of whether they want this type of advertising. We are also exploring what type of content might be prohibited from being collected and used – such as data that could be used to target children. Some businesses are already explicit about what types of ‘sensitive’ data they do not capture.

“A new way to target online advertisements could do a lot of good…but only if it’s handled sensitively” - The Economist: 5 June 2008.

At the IAB, we agree with The Economist: targeted advertising is a good thing for users who value relevant advertising. It helps deliver free online content and services and goes to the heart of how the Internet works. However, this type of advertising is complicated and – as an industry – we need and want to bring users (and others) up to speed on how it works and how it can benefit their online experience. We believe it’s in everyone’s interests that we work together and get this right.

For more information please contact Nick