Does Behavioral Tracking Threaten Consumer Privacy?

According to a recent study by researchers at the Universities of Pennsylvania and California at Berkeley and sponsored by the Rose Foundation for Communities and the Environment, consumers think it does! Whatever marketers themselves think, these opinions threaten behavioral advertising, and we should take them seriously.

The New York Times had an excellent article when the report was published. It’s an important report, and I’d encourage you to use the link in the Times article and download it to read the entire thing. You will find careful methodology and a carefully chosen, if not huge, sample.

The findings are what’s most important, and here are two of the key ones:

• Even when they are told that the act of following them on websites will take place anonymously, Americans’ aversion to it remains: 68% “definitely” would not allow it, and 19% “probably” would not allow it.

• Americans mistakenly believe that current government laws restrict companies from selling wide-ranging data about them. When asked true-false questions about companies’ rights to share and sell information about their activities online and off, respondents on average answer only 1.5 of online laws and 1.7 of the 4 offline laws [questions] correctly because they falsely assume government regulations prohibit the sale of data. (pp. 3 & 4)

I think the incorrect beliefs about government regulations contribute to the aversion problem; it’s another instance of people feeling duped when they find out the truth. This is a societal problem, not a problem for any one business. Still, individual businesses can be open and honest about their own activities, building trust as they do so.

Both these issues are important but let me present just one chart on aversion to behavioral tracking with the two columns you need to compare highlighted.
First, note that the respondents are more willing to allow tracking when it produces discount offers they want. We’ve been seeing a lot lately about how intensively consumers are using the web to look for promotions and discounts, so that makes sense.

Second, lower table, when the question includes specifics about the information used to tailor the ads, discounts and news, the percentage of people willing to accept goes down—a little less for discounts, but they all go down. Look further; when information is brought in from other websites (the essence of behavioral advertising) or from offline, the willingness to accept plummets.

The full report also had a breakdown by age segment. Younger people are more willing to accept the tailored offers than older ones, but there’s not as much difference as I expected. And younger people show the same pattern of being less willing to accept tailored offers when the source of information is specified.

This is disturbing to the Internet marketer, and there is no easy solution. There have been a few meager efforts by coalitions of businesses and trade groups to better inform users about the nature and benefits of collecting and using consumer data and the differences between anonymous and identified data. The efforts appear to have been half-hearted and it’s clear that they had little impact.

Worse, that’s the only real solution I can think of. Do you have any better ideas???

In the meantime, keep building your trusted brand!

Behavioral Redux

If anyone doesn’t believe that the Internet is still evolving with astonishing speed, try this. Just as I finished yesterday’s post on behavioral targeting, I noticed that a start-up in that space had received another round of venture funding. Lotame™ is another attempt at helping social networks monetize their business and marketers reach denizens of the networks. This ad was posted on the founder’s blog. It’s dated May 7, so there may be more than 28 million people 3 months later! According to Marketing Charts, MySpace had 75.2 million unique users in July and Facebook had 39 million. That’s a big pool of potential acquaintances for Lotame and customers for marketers! The question continues to be how to reach them in a manner they find acceptable.

Lotame founder Andy Monfried says that the tools developed for Web 1.0 don’t work in the UGC environment of Web 2.0. One reason is that websites no longer define content. That’s a simple but profound idea.

The proprietary technology the firm has developed is called Crowd Control™. Exactly how they do it is unclear—no surprise. The best hint is that the technology “allows us to aggregate behaviors unique to each page within user content.”
Here’s a link to their video page. There are a number of interesting snippets, but they describe the basic process as collecting, analyzing and leveraging data for marketing decisions. That’s what we’re all trying to do. The take-away from studying this site is the importance of behavioral analysis. In the social media space, it’s not about the site the user is on. It may not even be about the particular page. It could be the functionality on a particular page that provides the common thread that identifies a target market.

That describes analytics at a very micro level. Is that what’s necessary to connect with a Web 2.0 audience? And when we connect on issues that are relevant to them, will they pay attention?

Those are key marketer questions in the Web 2.0 world!

Next Step in Behavioral Targeting?

Marketers know that segmentation is key to targeting which, in turn, leads to increased marketing ROI. From the beginning of the Internet savvy marketers have seen the potential for improved targeting that comes from tracking customer activities on the web, as indicated in the chart from eMarketer (newsletter, June 19, 2008). Behavioral targeting is well established, although not without issues from the consumer perspective. Remember the controversy over Facebook’s Beacon advertising program?

Consumers are wary that their privacy is being invaded by ad targeting efforts. eMarketer’s July 29 newsletter quotes a study from Harris Interactive that shows 55% of respondents “very” or “somewhat comfortable” with the privacy and security policies of sites that allow targeted advertising. That leaves 45% who are “not very” or “not at all comfortable” with those same policies. That’s an interesting split! In the same newsletter they quote a TNS study in which a large majority of respondents describe themselves as knowledgeable about both privacy threats and tools to deal with them. With due respect to our customers, I absolutely don’t believe they are knowledgeable. I know how much trouble behavioral marketers have in trying to explain behavioral analysis and targeting to potential customers. I also know how unaware my own graduate marketing students are of the basics of behavioral targeting on the web. Consumers think they are aware, but it’s highly unlikely that they understand the intricacies. If they knew, would they be more or less concerned? My guess is more, not less.

That’s not going to stop the unrelenting advance of technology though. In this iMediaConnection video Jim Calhoun of PopularMedia describes what his firm is doing to add data from the social graph to targeting models. Direct marketers have long known that people gravitate to others like themselves and have used that kind of affinity in segmentation and targeting. The next step may well be mapping out the social graph and using those connections to better understand consumers. The first 2 minutes of the video talk about the behavioral marketing developments; the second half is a bit of background on the social graph. Watch either or both segments—it will either fascinate you or creep you out—depending on your personal perspective!
View the video here.

Then think about your customers, and how they’re likely to feel. Then consider the following quote from Fran Maier, executive director of TRUSTe, the privacy organization.

“Education once again appears to be the key to finding a constructive balance between behavioral targeting and consumer privacy, because no matter how much we assure anonymity, there is still significant discomfort with the idea of tracking . . .We have a solid indication that consumers want us to find a way to get them the advertising that is relevant to them. In order to do this, behavioral targeting is one of the most promising methods, but at the very least, it has to be made more transparent, provide choices, and deliver real value.”

While I agree with that statement, I still have a question. Is “education” best done by a single enterprise or would it be better received from an objective third party? Third parties like TRUSTe have a major role to play, but so far it’s not clear to me that they are reaching the great mass of Internet users with any impact. I think businesses should worry about that. They should also make a herculean effort to let their customers know what they are doing and to explain the value that targeted advertising does bring. They have to do that in a way that’s comprehensible and not too self serving. That’s a tall order, but it’s necessary to build and maintain consumer trust!