Ad targeting improves as Web sites track consumer habits

NEW YORK (AP) -- Based on the weather reports and restaurant listings you check out online, Yahoo Inc. has a good idea where you live. Based on searches you've done, the Web portal might also know where you want to go.
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Facebook CEO and founder Mark Zuckerberg speaks to advertisers in New York November 6.

Don't be surprised then to suddenly see an advertisement on flight deals between those two places. It's what United Airlines did with an ad on Yahoo earlier this year as people browsed for something completely unrelated to travel.

Elsewhere, online hangout Facebook is mining friends' buying habits, and major Internet portals have bought companies to expand their reach and capabilities for "behavioral targeting" -- all so advertisers can try to hit you with what they believe you're most likely to buy, even as doing so means amassing more data on you.

"When you are online today, you've been labeled and tagged as this type of consumer in milliseconds," said Jeff Chester, executive director of the Center for Digital Democracy. "All of a sudden you are exposed to a vast number of invisible salespeople who are peering over your personal details to figure out the best way to sell to you."

Behavioral targeting, commonly accomplished by depositing tiny data files on personal computers to keep track of surfing patterns, has raised privacy questions and, at least in the case of Facebook, user complaints.

From the perspective of Web sites and advertisers, though, behavioral targeting can bring to the rest of the Internet some of the relevancy Google Inc. and others successfully mined for billions of dollars with text-based search ads.

"Everyone's trying to find the next, best mousetrap to compete with search," said Adam Broitman, director of emerging and creative strategies with ad agency Morpheus Media LLC.

Although behavioral targeting isn't right for all advertisers, it has become increasingly important as companies try to break through the clutter. The research company eMarketer projects that spending on behavioral targeting will nearly double to $1 billion next year and hit $3.8 billion by 2011.

Targeting has been around as long as there has been advertising. Automakers promote themselves in car magazines. Political campaigns send mail to likely voters. As advertising moved to the Internet, ads for diapers clung to parenting sites.

With search came contextual targeting -- the ability to target messages even more precisely based on search terms or keywords appearing in articles. Behavioral targeting brings capabilities to sites without good or reliable keywords -- for example, a social-networking profile that touches on dozens of hobbies and interests at once.

Read enough golf articles online and a data file will be put on your computer labeling you a golf fan. When you're on a Web site on cooking, don't be surprised if ads for golf clubs follow you there.

The concept has been around for years, but enough Web sites are now participating that advertisers can still reach a sizable group even if they target narrowly.

They can also target more smartly using surfing patterns across a broader set of sites, or in Yahoo's case letting United Airlines customize ads by inserting city pairs and prices specific to the individual user.

Consumers are having trouble understanding all that Web sites are up to, said Ari Schwartz, deputy director of the Center for Democracy and Technology.

The Federal Trade Commission recently held hearings at which consumer-protection and privacy groups including Schwartz' called for the creation of a "do not track" list.

The Web portals, particularly Time Warner Inc.'s AOL, are stepping up their educational efforts in response to privacy concerns, trying to sell Internet users on the idea that if they are to see advertising to support free services, a targeted, relevant ad is far less annoying.

They also stress that they aren't capturing sensitive information like names and e-mail addresses, and in many cases consumers can take steps to decline targeted ads.

Indeed, companies aren't going as far as they could.

"At the end of the day, if behavioral targeting is being used and consumers get annoyed, they are going to take it out on the advertiser or the publisher that placed the ad," said Michael Cassidy, chief executive of Undertone Networks, which contracts with a network of third-party sites to run ads.

Most Web sites and marketers have been shunning the ultimate targeting -- ads that greet you by name.

Yahoo could easily do that using registration information, but "I'm not sure people would like that or not," said Richard Frankel, Yahoo's senior director of product marketing.

Many have declined to sell ads based on diseases you've read about.

"We could track them and target ads for sensitive health conditions and get lots of money from pharmaceutical companies for that, but there are certain things we've chosen not to do," Dave Morgan, a senior AOL advertising executive who founded Tacoda, a behavioral-targeting company AOL bought in September.

"Sensitive" includes all targeting to HIV and cancer. Beyond that, health ads are reviewed on a case-by-case basis, Morgan said.

The Network Advertising Initiative, an industry trade group that counts Yahoo along with AOL and Microsoft subsidiaries as members, began a study about seven months ago to clarify the boundaries.

Carl Fremont, whose advertising agency Digitas handles many pharmaceutical campaigns, said several ideas have been shot down by lawyers at drug companies. He would not name any, and three major drug companies did not respond to requests for comment.

Fremont, the agency's executive vice president, said he sees opportunities in reminding known patients to take their medication or perhaps try a competing drug.

Despite the promises, targeting isn't always appropriate for Web sites and advertisers.

Although sites can charge more per targeted ad, fewer readers see any given one, resulting in less revenue in some cases, said Brian Quinn, vice president of ad sales for The Wall Street Journal's Web site and three other Dow Jones & Co. properties.

"We just end up selling the frosting and not the whole cake," he said.

And while targeting may work for cars and travel, it's more difficult to gauge a person's interest in soda or satellite TV service. In such cases advertisers often prefer mass amounts of cheap, untargeted spots, said Sarah Fay, chief executive of ad agency Carat.

Advertisers and Web sites also have to figure out how far they can push without alienating their users.

Many Facebook users, initially unaware that tracking was occurring, have complained that the site went too far in generating endorsements based on friends' online activities. On Thursday, Facebook agreed to offer better notification and controls, and the company is counting on users to feel more comfortable about the tracking over time.

Users' comfort with data profiling has indeed shifted over the years.

Google faced criticism when it introduced an e-mail service that paired ads with the words inside private messages. Millions of people now use Gmail with scarcely a blink.

Users will eventually embrace the latest tactics, too -- and by then, they'll complain about even deeper levels of intimacy yet to be invented, said Tracy Ryan, professor of advertising research at Virginia Commonwealth University.

"You want to have enough targeting that a consumer notices the message and pays attention, but you don't want it to be so obvious that they are thinking (there) is targeting," she said. "That would be scary."