Privacy and the Future of Targeted Advertising

I was going through my usual news download this morning when I happened across the following blog article (here) from the washingtonpost.com that talks about the recent disclosure by major search providers that they are tracking ever increasing information on their users without their users’ explicit consent. The reason why their collecting this information? Better ad targeting.

For many online retailers, this may not seem like the worst idea - better information from search providers means a better understanding of who’s buying their products, when they’re buying them, and what they’re most likely to buy next.  For many consumers though, there is an increasingly fuzzy line between companies collecting information about their buying habits to better meet their needs and companies invading their privacy.  Rep. Ed Markey (D - Mass) is actually proposing new legislation that would limit what businesses could collect and ultimately do with their data, whether it be analyzing clickstream data to track customer behavior on their own site or trading information with data providers and other retailers to get better qualified lead information.

As someone who is entrenched in the analytics business, I fear the backlash from overzealous companies that trade on customer trust in return for increased revenue streams. There is much discussion online over NebuAd’s deep packet inspection technology being deployed by many ISPs to track individual user’s web activity for micro-advertising. While they provide an opt-out service for consumers, it’s still unclear whether you are opting out of receiving micro-ads or opting out of being tracked by the service. There was a similar outcry with the launch of Facebook’s Beacon technology which sent data from external websites back to Facebook for better ad targeting. Although they too now provide an opt-out for users, many bloggers and websites have resorted to publishing step by step instructions for completely blocking the Beacon technology through your browser.

Clearly, there is a middle ground where both consumers and businesses will feel comfortable with the amount of data being tracked and analyzed - my hope would be that this is can be found through best practices and not legislated through Congress. In the meantime, companies should focus on the following to maintain a level of trust with their customers:

• Transparency - Most important, let your customers know what information you intend to collect and how you intend to use it - and more importantly make this statement prominent and easily accessible on your website. Many customers don’t mind being targeted as long as they know up front how the company aims to target them.
• Opt-Out and Opt-Down - All companies should provide an opt-out of targeted advertising, but most should also provide an opt-down - the ability to decrease (or in the rare case, increase) how often or which types of products get advertised to the individual user.
• Anonymization and Obfuscation - While email targeting usually comes down to the individual level, most data analysis is done in aggregate and doesn’t necessarily need personally identifiable information to come up with important rules and formulas. If you’re working with a data analysis provider, they should be able to outline what information they need and what information can by anonymized or obfuscated to hide the identity of the underlying customer.

If all companies could follow these simple guidelines, I think we could find a happy medium between information collection and consumer privacy that wouldn’t necessitate legislative intervention.

Tags: Personalized Marketing, privacy, Targeted Advertising

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This entry was posted on Tuesday, August 12th, 2008 at 8:40 pm and is filed under Personalized Marketing, Targeted Advertising. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.