November 4, 2008

These fillips have come out strongly against targeted advertising as practiced today (1). It was therefore a good investment of my time to attend a presentation organized by the MIT Enterprise Forum on this very subject. "Know your ennemy" is a useful complement to "knowing oneself".

The speakers made a good cross section of the industry and were there to inform rather than mislead the audience. If they leaked any secret however, it escaped my attention. What struck me rather was the down to earth way in which they spoke about privacy.

A year after the Federal Trade Commission addressed privacy concerns arising from behavioral advertising and six months after Google's victorious campaign to seize DoubleClick, privacy is still very much an issue. There is a line the advertising industry recognizes it cannot cross without incurring heavy damage to its reputation. The problem is that "the line keeps moving" and, sweet irony, its exact location depends on the targeted user.

If this uncertainty were not enough, "privacy is a matter of perception" rather than fact and the industry is not above "acting surreptitiously". Notice how these two remarks are self-reinforcing. The more advertisers hide their wiles, the more consumers become suspicious. The more consumers ignore the facts, the more dangerous it is for the industry to attract consumer attention to what is really going on. Reviewing The Numerati by Stephen Baker (2), Rob Walker mentions a case of target segmentation by marketers (*). Segmentation is nothing new for sure, but who would be pleased to learn she received an advertisement because she belongs to the "cheapstakes". Seeing too much of the cook spoils the appetite.

Consumer suspicions would certainly increase if they read David Bowen's analysis of Web 2.0 (**), which focuses on two tangible factors, location and interaction. The much abused Web 2.0 concept is thus revealed as two independent trends whereby third-party platforms marginalize one's own servers and published statements give way to interactive dialogs. In both cases, risks increase as some control is lost. Contrast uploading a public relation news release onto a corporate computer to sparring with dissatisfied clients on a popular blog hosted by a public provider.

David Bowen writes for "corporate web managers" but his analysis applies to consumers. Advertising 2.0 has two prongs, to accumulate personal profiles on remote servers beyond the control of the consumers and to lure them into interacting with ads. In both cases, risks to consumers increase as do rewards to advertisers. Hadn't I already spoken of the downside of personal data aggregation and spotted this inherent conflict of interest?

Before confronting the privacy issue, let us mull over a maxim mentioned by our MIT speakers, "data is the new currency". They proceed to complain how difficult it is to know "who owns what consumer data" and therefore extract maximum profits. We have already witnessed the reach of this phenomenon, in the case of collateralized debt obligations. Accounting uncertainty radically undermines trade and thus economic activity.

It remained for one of the speakers to point in the right direction. Acknowledging "consumers are lazy", Michael Troiano nevertheless warned us "user participation must come and, with it, some friction is inevitable". I whole heartedly approve. Advertising 2.0 has a bright future but, as we wrote earlier, "trying to split the spoils without the consumers' consent is a high risk game".

To pave the way, read David Bowen's analysis once more. Web 2.0 may add risk to corporations, it also brings them rewards and the best managers will find the balance positive. Both advertisers and consumers should openly recognize consumer risk not as a reason to turn one's back to the future, simply to clear the atmosphere for appropriate solutions to emerge. Lazy consumers might not know how to describe nor develop one. Yet, if they see risks realigned with rewards and a positive balance to boot, expect them to be quick to spot and favor the best model available.

Add to this consideration the lesson conveyed by ePrio's technology. Targeted advertising can be implemented on top of the richest profiles, all the while any access to profile data being denied to any party besides the profiled target. Rather than trying to convince consumers of intangible rewards, the advertising industry would be better off to use this approach to tangibly lower consumer risks.

Consumer ownership over personal data leaves nothing for the advertising industry to quarrel about. The only actions to account for should be the discovery and the use of data for targeting. No uncertainty there. The program used to manage his or her profile for the consumer can easily monitor who's responsible for each new data discovery, namely the first filer. Unfair, data providers and aggregators will say. The consumer is best positioned to fill his or her own profile first and bypass the aggregator. If he or she cares, can we refuse the economic efficiency it generates?

Ill gotten gains do not profit, but fortunes can be made on sustainable targeted advertising mechanisms. Why wait?

Philippe Coueignoux

• (*) ....... They've Got Your Number, by Rob Walker (The New York Times Book Review) - November 2, 2008
• (**) ..... How to win by using Web 2.0, by David Bowen (The Financial Times) - October 21, 2008
• (1) see "personalized advertising" in the list of Major Themes of these fillips.
• (2) "The Numerati" by Stephen Baker (Houghton Mifflin Company) - August 2008, 244 pages