You may consider yourself a regular guy booking a trip to Mardi Gras, but to the 24/7 Real Media advertising network, you look like a "globetrotter" because it has watched you buy plane tickets before.
So the day after you buy a ticket to New Orleans online, don't be surprised to see an ad for luggage when you click over to that fishing Web site. And at that same fishing site, a woman shopping for her husband's birthday present might see an ad for diapers, because 24/7's ad network has pegged her as a new mom.
This is the frontier of Internet advertising, where a bunch of young companies increasingly are tagging, tracking and analyzing us as we move across different Web sites. Their goal is to display ads they deem relevant based partly on our surfing histories, which they record using tiny "cookie" files stored on our computers, and other technology.
"With today's advanced technology, ad networks can be a lot smarter about how they deliver ad impressions than they were four to six years ago," said Rich LeFurgy, former chairman of the Interactive Advertising Bureau and an investor in Blue Lithium, one of many new networks taking form.
Count me a skeptic about these networks, even though I find their technology tricks fascinating. I doubt that advertisers will make Internet banner or skyscraper ads personally relevant until they develop tools that let us tell them our true interests, rather than surreptitiously watching what we do and drawing inferences. Then again, who is going to take the time to tell advertisers how to build better electronic billboards?
That's why this new breed of networks is working on technology that essentially tries to read our minds. They have hired mathematicians to devise complex formulas that crunch a mind-numbing number of variables. Some focus on past activities of individual Web surfers; others look at how demographically similar groups have responded to similar ads in the past. Increasingly, ad networks are blending a bit of both while mixing in traditional content targeting, which means ads are selected based on the topics that appear on pages people are reading.
Yahoo and Microsoft's MSN network have long tracked what people do inside their own Internet networks. What's different about the new ad networks is that they are seeking a more holistic view of our behavior across thousands of Web sites.
Over the past year, 24/7 Real Media Inc. and Blue Lithium are among the half-dozen companies to roll out ad-delivery systems. They compare click-through rates on ads against factors such as time of day an ad was shown, its placement on a page and how various groups responded to it. Then they crunch in additional data about what each Web surfer has read, bought, almost bought but didn't, or clicked on before.
24/7 Real Media collects no names, addresses or other personal information, but says it watches what people do across more than 800 sites where the company delivers more than 5 billion ads a month. It classifies people into eight groups, including "music lovers," "moneymakers" and "globetrotters," and analyzes behavior in 606 different interactions with content, such as a propensity to follow the National Football League.
The company released a study this month that found its special surfer groups responded in unexpected ways. People classified as "gamers," for example, clicked on ads eight times more often at health sites than when the same ads appeared on gaming sites.
The only advertiser named in the 24/7 study was Starwood Hotels, which ran a 45-day campaign promoting its hotel spas. Half the ads were targeted to "globetrotters," or surfers identified as travelers, regardless of which site they were visiting. The other ads were shown to everyone visiting travel sites. The result, according to 24/7, was a 22 percent higher click-through rate for ads shown to the "globetrotters" than for ads shown in travel sites.
Blue Lithium founder Gurbaksh Chahal said his network takes a "self-healing approach" by continually analyzing click-through rates of people and ad locations. It removes ads from Web sites where click-throughs are low. "It finds out what is working in real time," he said.
Most of the ad networks also are experimenting with revenue models, and several already are highly profitable.
One large targeting network called Fastclick of Santa Barbara, Calif., held an initial public stock offering two weeks ago. Fastclick is huge. It says it served more than 200 million ads a day across 8,000 sites to 113 million people in February, reaching 71 percent of the U.S. Internet population. After an initial pricing of $12 a share, Fastclick shares slumped, closing yesterday at $11.
Also entering the targeting frenzy is Claria Corp., formerly known as Gator Corp. Claria said that in two weeks it will launch an advertising service that tracks user behavior. Claria has already signed up 200 advertisers for its new service, said Scott Eagle, a senior vice president. Claria tracks Web surfers far more closely than most ad networks do, using "adware" that about 40 million people have downloaded to get other free programs.
Debra Aho Williamson, senior analyst with the eMarketer research firm, said privacy concerns and worries about data-sharing could keep such networks from becoming the predominant method of delivering Internet ads. A recent eMarketer survey found that 57 percent of Internet users objected to the idea of networks tracking behavior across different sites, even if they collect no personal information.
I don't find anonymous ad targeting intrusive or offensive. I just don't believe the formulas for predicting behavior based on what people bought or read in the past are smart enough yet to revolutionize advertising.
Still, advertising has been so broadly targeted to fuzzy demographic groups for so long, even a slight boost in relevance would be a welcome change for advertisers.
Leslie Walker, Washington Post. April 14, 2005
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