SAN FRANCISCO -- Picture this: You're shopping online for a new minivan, surfing automaker websites and buying guides. You then head to the homepage of your local paper to check out the headlines, and at the top of the page is an ad for a local car dealer, offering rebates and low financing on new minivans.
If you're like many web users, you probably find it creepy that your local paper knows you're looking for new wheels. Even so, advertisers are betting you're far more likely to click on the car dealer's ad than a random banner for a dating site or DVD rentals.
That's the theory behind behavioral marketing -- a growing niche in the online advertising industry focused on targeting promotional messages to an individual's online activities. Some might call such tracking across websites by a less flattering name: adware. Marketers call it a promising revenue stream.
Behavioral marketing was a prominent buzzword at this week's Ad:Tech conference in San Francisco. The conference, held in the midst of a boom period for internet ad sales, devoted considerable resources to identifying ways for online publishers to generate bigger profits from advertising. Many of the most popular strategies involved mining more information about individuals.
Targeted marketing is nothing new in the online world, as anyone who's ever received personalized book recommendations from Amazon.com can attest. However, by recording peoples' movements over networks of web properties rather than just individual sites, some marketers are betting that they will be able to improve response rates to online ad campaigns dramatically.
"The idea is ... to see if they exhibit some pattern of behavior that you can target with an ad," said D. Reed Freeman Jr., chief privacy officer at Claria, of Redwood City, California.
Claria, formerly known as Gator, is best known for delivering pop-up ads based on online behavior. But the company has also been working with publishers to use its technology to serve ads on their sites. Through BehaviorLink, a service Claria rolled out this spring, the company and participating advertisers buy unused ad space from publishers and target messages to viewers based on records of their online activities.
"You're fishing where the fish are," said Scott Eagle, Claria's chief marketing officer, who acknowledged that consumers might find ultra-specific advertising "eerie" at first. But in most cases, Eagle said, people prefer to view ads that match their interests.
Recently, Eagle said, a number of sites have begun giving people the option of receiving either the same ads as everyone else or a selection that is believed to be more relevant to their interests. Under the best-case scenario, he said, ads are so appropriately targeted that viewers will regard them as desirable content rather than unwanted distractions.
"It is probably true that people don't mind getting more-relevant ads, but there's a question of what they're willing to do for it, and whether they understand the bargain at hand," said Ari Schwartz, associate director of the Center for Democracy and Technology, which supports broader restrictions on online profiling.
Under guidelines laid out by an advertising industry group in 1999, marketers are barred from collecting sensitive, personally identifiable information about internet users. The guidelines also restrict web firms from merging online data with personally identifiable information from offline databases, unless a person consents to it.
But Schwartz said he's concerned that marketers and individual websites can change privacy policies in the future. Profilers might be using anonymous tracking technologies today, he said, but there is no guarantee they will continue to do so.
Additionally, even if advertisers don't know your name, they may still know an awful lot about you -- including your IP address, geographic location and where you spend your time online.
By the same token, broad data-collection capabilities are what make the internet a desirable advertising medium. In a report released this spring, research firm eMarketer noted that the ability to record demographic data about a person, such as age and gender, and combine it with behavioral data is what sets the web apart from traditional media.
"The beauty of what we have here is you have a lot more data to work with, and you can do it at a lot more anonymous level," said Omar Tawakol, marketing vice president at Revenue Science, addressing an Ad:Tech forum on behavioral marketing.
On the technology side, targeting ads across websites requires something more extensive than the typical cookie, a file used to monitor visitors' activities on a website. For more detailed profiling, marketing companies rely on third-party cookies, which may be set by an internet site other than the one a person is visiting.
To marketers' relief, use of third-party cookies won't be impeded under a federal spyware bill introduced by Rep. Mary Bono (R-California). The bill does not bar use of the tracking mechanisms, but does instruct the Federal Trade Commission to carry out a review of cookie use.
For now, internet users can expect to receive more marketing messages tied to their personal interests similar to the recommendations that Amazon.com has long served up to its patrons, said Steve Johnson, CEO of ChoiceStream, a developer of technology for targeting information to people based on its analysis of their preferences.
Johnson, addressing attendees at Ad:Tech, said he believes internet users are also more open to letting sites collect information about their preferences and online activities.
"Three years ago, the answer was quite different: 'My God, don't look at my transactions, don't ask me questions,'" he said. "I give Amazon credit for breaking the ice and showing consumers it's not all that bad."
