Consumers have been complaining more loudly than ever about privacy issues and the Federal Trade Commission has even proposed a do-not-track mechanism, which would halt marketers’ ability to follow consumers online. But ad spending on the most controversial form of targeting—behavioral targeting—is expected to rise by double digits in 2011. So how can marketers tread safely without turning off their audience? eMarketer principal analyst David Hallerman weighs in.

Question: A study done by PreferenceCentral found that the more people know about behavioral targeting, the less willing they are to receive free content in exchange for relevant ads. If this is accurate, should marketers rethink their spending on behavioral targeting?

David: What you have to wonder is, do people really view behavioral targeting as an invasion of privacy, or do they dislike it because they have no control over how marketers are using their personal data?

There will always be people who don’t want ads anywhere, but more people are beginning to understand that relevant ads can be useful. If advertisers are going to spend on behavioral targeting, they need to understand and accept that giving consumers more control over how they are targeted will help alleviate their fears.

Focusing on control as the crux of the whole privacy issue, as Spanfeller Media Group CEO Jim Spanfeller said, is “a way to make the privacy issue less about a religious conversation and more about a business conversation.”

Question: What kinds of “control” can marketers offer to consumers?

David: First, consider that one of the most trusted forms of marketing is opt-in email. The least trusted is spam. They’re both the same type of marketing, but the difference is that consumers give permission to receive the former. Applying this same line of thinking to display advertising can help to reduce concerns that behavioral targeting elicits.

Second, marketers and advertisers need to continue letting consumers in on how the process works. The leading example I’ve seen like this is the Power Eye button (which has been endorsed by AT&T, American Express, Microsoft, and other major advertisers) developed by the Better Advertising organization.

Power Eye provides an icon consumers can click on in the upper right-hand corner of an ad to get information on why that particular ad is being served to them. This type of transparency combined with some level of permission or opt-in will likely create a stronger sense of control and a more receptive audience.

Question: How would this affect ROI?

David: Establishing an initial trust between marketers and their audience through transparency can create the opportunity to find out more about the audience over time. That eventually makes for more robust data and therefore more accurate targeting—just as we’ve seen with email marketing, which has proven to be very effective.

Question: Will educating consumers and giving them more control be enough to satisfy consumers that the industry can regulate itself even when it comes to behavioral targeting?

David: Education together with greater consumer control over targeting and their data might be enough, but will the ad industry do enough? That’s the big question still out there. There are doubts about how much audience control the industry is willing to offer, and that’s why the government is looking to intervene.

Question: What else can the ad industry do?

David: Advertisers need to ask, “How does transparency take place?” I think we’ll see a lot of discussion around that this year because that has not been answered in a definitive way. I expect to see more examples like the Better Advertising button—which is just a first step in a longer process—especially in response to the government wanting to regulate.

Much of marketing is language. Marketing to marketers is also very much a question of language. For instance, look at today’s New York Times piece on real-time bidding for online ad placements.

The article gives this example of the process:

“Say a man just searched for golf clubs on eBay (which has been testing a system from a company called AppNexus for more than a year). EBay can essentially follow that person’s activities in real time, deciding when and where to show him near-personalized ads for golf clubs throughout the Web.”

In fact, the method of personalizing ads based on user activity has not really been, as the article’s lead puts it, “largely missing until recently.” Instead, the term more commonly used for such real-time ad personalization has been “behavioral targeting.” (Read more…)

Boston-based company uLocate unveiled what looks to be the next logical step in the location-based marketing puzzle today with the debut of WHERE ads, a “hyper-local ad network” that aims to serve consumers with more geographically and contextually relevant ads than those provided by standard third-party ad networks. uLocate will make WHERE Ads available to other publishing platforms as well. (Read more…)

Let’s be blunt. What the Federal Trade Commission (FTC) has been telling the online ad industry is simple:

Either you create and put into practice effective ways to regulate the use of consumer data and give the public tools to control the privacy of that data, or we – and probably Congress – will impose restrictive regulations and laws on your industry.

As reported yesterday by The New York Times, one segment of the online ad industry – the Future of Privacy Forum – has implemented a first step in this process: The I-Button. This little icon (see above) is designed to be added to online ads that use demographic and behavioral data for targeting, to inform Internet users why they’re seeing that ad.

(Read more…)