Charter Communications announced they were cancelling plans to monitor their subscribers web surfing habits, data that would in turn be sold to Nebuad, a technology start-up and an emerging player in the burgeoning behavioral targeting industry, for the purposes of serving up highly targeted advertising.

Given all of the attention Charter received for announcing their monitoring plans, it’s clear that the privacy concerns being raised by both legislators and consumer advocates has shut this program down…for now. But you can expect Charter, Nebuad and others to continue to press this issue and emerge with a reformulated message about the ‘consumer benefits’ of behavioral targeting - there is simply too much money at stake and too much pressure on ISPs to generate incremental revenue beyond simply connecting consumers to the Internet.

As I’ve said before, transparency and education is the key for ISPs and start-ups like Nebuad - that, and just plain common sense and ethical business practices. In combination with today’s political climate, recent concerns about monitoring citizen behavior and the growing distrust of corporate America in general, providers and enablers of these kinds of tracking programs - not to mention the brands participating in such targeting programs - will need to demonstrate through communication and action a fierce commitment to protecting consumer privacy, while theoretically, ‘enhancing the consumer experience.’

With respect to the advertising industry at large, I urge us to take the high road, to be smart about the kinds of programs we recommend and execute for our clients. “Rep. Edward J. Markey, a Massachusetts Democrat who chairs the House Subcommittee on Telecommunications and the Internet, said in a written statement. I urge other broadband companies considering similar user profiling programs to similarly hold off on implementation while these important privacy concerns can be addressed.” Reading between the lines, it’s clear that if the advertising industry doesn’t regulate itself and implement guardrails to protect consumer privacy, the government will do it for us…and who wants that?



The following is the second half of a post I wrote earlier this week regarding behavioral targeting and the related privacy concerns. You can read the first half here if you haven’t seen it already.

There are arguably four distinct types of Behavioral Targeting techniques currently being used:

  1. On-Site Targeting: The users are segmented based on content views or actions on one site and then are targeted on the site itself…this has been happening for years now – some are doing it more effectively than others, but the idea here is that as users consume specific content, the advertising these users see is impacted accordingly. While it may be an issue of awareness, consumers – in general – don’t seem terribly concerned with this type of behavioral targeting technique.

  2. Network Targeting: The users are segmented based on content views or actions on one site and then are targeted where ever they go on sites participating in the behavioral ad network. This technique starts to get generate some concerns as the concept is further understood. The idea of network targeting is to connect disparate web properties with one another for marketing purposes, allowing increasingly more relevant advertising to surface based on the content and sites a consumer frequents.

  3. The third behavioral targeting technique is a game-changer that has effectively made the issue of online privacy a national – and international - topic for debate. Internet Service Providers (ISPs)– the guys that connect you to the Internet itself, Comcast, Charter, AT&T, etc. – are getting into the behavioral targeting space and because the ISPs own the ‘source code’ if you will about what sites these users are visiting, the specific content they’re consuming and the actions they’re taking – or not taking – there is a growing concern about how this data is being collected, analyzed and used for marketing purposes for customers and privacy advocates.

  4. Though dramatically different from the ‘spy-ware-like’ behavioral targeting techniques cited above, the popularity of, and the reliance upon social networking sites like Facebook, MySpace, YouTube and others has ushered in a new type of marketing tactic – ‘Social Targeting.’ I see social targeting as the confluence of community, brand affinity and usefulness. Without rehashing Facebook’s Beacon disaster of last year, we can all agree that social influence plays a critical role in our daily lives – just think about how often your friend’s recommendation, a colleague’s comment or an acquaintance‘s perspective alters or influences your behavior… When you examine the financial requirements of sites like Facebook and MySpace – and the kind of information consumers are broadcasting about themselves, the idea of monetizing this data through relevant marketing programs begins to make more sense.

Opt-Out or Opt-In? The letter Charter Communications recently sent out notifying users of their new behavioral targeting policy provides the ability for customers to opt-out of the program if they do not wish to be monitored. While it’s clear that Charter is hoping the majority of their customers will remain in the program, it’s unfortunate that Charter chose to make this program opt-out, as opposed to opt-in. Although Charter’s letter communicates its intention to collect user-behavior data and apply these profiles for marketing purposes, automatically enrolling all of their customers into the program, and forcing them to opt-out only continues to reinforce the perception – and potential reality – of unethical business practices. My advice to the ISPs and advertisers is be incredibly transparent – if these kinds of targeting programs really can make my online experience better, explain that to the consumer upfront and you might be surprised by the response.

A Better Experience.One of the consistent claims of behavioral targeting is the promise of a better online experience. But what does this mean? Anyone who’s surfed the web for even a few minutes quickly realizes that – in large part – advertising is driving the internet economy. The current experience is one fraught with marketing and advertising irrelevance, clutter, noise and distractions. An experience (the marketing and advertising experience that is) ‘controlled’ or influenced by behavioral targeting is likely to be more relevant and interesting to the customer, thus the promise of a better experience. There are customers who will find this more relevant experience to be a better one – but again, be clear about what you’re doing, and even more importantly, why you’re doing it.

Brand Loyalty.Brand advertisers need to pay special attention to this issue as the potential for brands and organizations to unknowingly participate in behavioral targeting programs that could result in a major backlash is potentially high. This is a particularly important issue for the world’s largest brands who spend substantial media dollars in an effort to build brand awareness and attract new customers. Brands must be very careful not to associate their media placing strategies by participating in behavioral targeting practices that might harm the brand’s value and equity. As marketers, we are always looking for that unique and differentiating insight that can be exploited and optimzed to reach the intended targets, but doing so in a manner that the majority of consumers feels is potentially unethical or perhaps even more to the point, invasive and sinister, is a sure-fire way to alienate your customers and reduce the value of your brand.



I’ve written in the past about the increasingly contested and complex issue of online privacy and behavioral targeting. Last week I was featured in an NPR piece discussing this issue within the context of a recent Charter Communications announcement that they would soon begin monitoring their users online activity and behaviors for the publicly stated purpose of improving their targeted advertising platform.

 

When you examine the topic of online privacy and behavioral targeting, it’s quickly apparent just how complex and multi layered this issue has become. In light of the recent NPR piece, I thought I add some additional context and perhaps fodder for debate - and in an effort to make this more readable, I have broken this post into two parts. I’ll post the second half tomorrow.

 

One of the fundamental aspects that privacy advocates are missing when they lobby for potential legislation and regulation of online monitoring is the very nature of the Internet Economy – an economy that is predicated, and has been since its inception, on the basic notion of trade. Digital brands (Facebook, MySpace, YouTube, The New York Times, Gmail and countless others) are providing a valuable – and clearly very popular – set of ‘free’ services that are advertising supported and funded by brands in the very same way that television has been broadcasting ‘free’ programming for 75 years. In the case of the social networking sites, consumers are being provided with large amounts of virtual storage space and sophisticated platforms that allow these consumers to connect with their social circle in a single place, communicate via free email services or bypass the $1.50 each day it costs to buy a physical version of the NYT. The key point to understand is that these brands are providing tangible, valuable services that are essentially free to consumers, and the implicit – and explicit – agreement that exists is the trade of information for the use of the services.

 

While it’s clear that consumers have essentially embraced and accepted the current economic terms of the Internet - services in exchange for personal information - they’re clearly not thrilled with the idea of monitoring their browsing behavior for the purposes of developing more effective marketing. I suspect that consumers understand the 1:1 relationship they have with an a single online brand, but are fearful of the potential repercussions of being monitored on a ‘network level.’ The requirement to monetize these traditionally ‘free services’ via smart, relevant and effective advertising platforms will continue to challenge marketers and publishers to balance the privacy concerns of consumers against the need to generate profitable revenue for providing these services.

 

I will explore some of the other aspects that are contributing to this complicated and ever-changing issue in subsequent posts, including the second half of this story tomorrow. As always, comments, opinions and questions are welcome. 

 

 



Social Profits

May 12, 2008

Musings

Last week, I wrote a post about the difficulty marketers and agencies are having in developing the right kinds of social networking programs, applications and content. In short, no one brand has cracked the code, despite the hyperactive assault in the form of thousands of failed applications and some high-profile strategic gaffes (Beacon anyone?) across social networking landscape.

 

But that’s the perspective of marketers and advertisers – what’s it like for the social networks and the business of monetizing the web’s largest aggregated, engaged audiences? The USA Today ran an interesting piece today about the challenges social networking sites are facing in becoming profitable businesses. And while this story is not new, you can expect this issue to reach a tipping point in the near future.

 

The big players in the social networking space – Facebook, YouTube, MySpace – each with bloated valuations, all face a series of market forces that are conspiring to complicate both the marketing and monetization hurdles: increasing privacy concerns, a growing $50 billion online advertising industry, more and more new entrants into the social networking arena and the pressure that’s mounting on both marketers and the social networks themselves to effectively – and profitably – exploit the largest and most available online consumers.

 

The USA Today article includes some interesting quotes that are worth examining: Facebook’s new COO, Sheryl Sandberg makes the accurate point that ‘advertisers follow people,’ but dismissively suggests the obvious difficulty in turning these users into sustainably profitable assets for the company by stating, ‘[W]e have 70 million active members. Once you have engaged users, the revenue will follow in that order.’ Really? If so, how? And if this is simply a matter of allowing economics to take its natural course, when can we expect the revenue – the profitable revenue – to follow? In this context, I’m intrigued by this comment the author makes: ‘It is also conceivable that social networking, like email, will never make piles of cash.’ Now that’s a sobering thought for VCs, social networking sites and advertisers alike – and a topic I plan to explore in a future post.

 

The first iteration of the web saw the rise and fall – and then the rise again – of the Portal. Though obviously different in numerous respects, the business and monetization challenges between social networking sites and portals are remarkably similar. What portals didn’t do initially was act and behave like media properties – instead, they focused on acquiring millions of users, but with no real plan to turn these consumers, well, into consumers. ‘If you have the right audience and the right engagement, you can build a real media business.’

 

Stated Tina Sharkey, CEO of BabyCenter.com – a site (I like to think of it as a product) that BSSP led the wholesale redesign of last year. Social networking sites would benefit from adopting a similar mindset and accompanying set of strategies, embracing an approach that will continuously force business and management decisions that turn ‘active members’ into active consumers.

 

 



It seems the bloom might be off the Facebook Application already… Numerous articles and blog postings have suggested recently that brands, agencies and developers alike continue to struggle with how to develop, launch and sustain effective social-network marketing programs. Shocking.

 

While the Facebook phenomena is a wildly interesting study about the monetization of a social networking platform that boasts some 69 million members, I am more interested in exploring the craze, hysteria and near-panic that seems to accompany the Next Big Thing. Before Facebook, it was YouTube and before that it was MySpace, and before that something else…the point is, marketers rush to exploit these applications or new destinations before we fully understand them and the potential for marketing and advertising to peacefully coexist within these environments.

 

The decline in Facebook application development activity – already! – suggests that social networking applications may in fact not be the most effective or appropriate way to connect with your audience. Just because you can, doesn’t mean you should. The broader point that I’m trying to make is that it’s not about being first to market, it’s about being right in the market. Be sure your social network marketing strategy aligns with the broader goals of the brand and that the experience you introduce speaks to your audience in a useful, relevant and appropriate fashion.