DaxThink: Digital life

Money may be flowing into online advertising, but website owners are often slow to adopt the necessary tools to bolster visitor profiling, says David Reed.

When everybody talked "about the Internet years ago, they said it would identify people and talk to them in a different tone of voice depending on who they were and what they were interested in. Then nothing happened."

For many online advertisers, still nothing is happening when it comes to targeted ad serving. The above complaint raised by Donald Hamilton, managing director of behavioural profiling service Wunderloop, is a common one. Practices among media owners which would not be tolerated in the offline world are accepted - whether willingly or through lack of choice - in digital advertising.

Take the anecdotal evidence of one advertiser that was looking to generate traffic from consumers in the North of England and Scotland, only to find it was getting hits from the whole of the UK, Hong Kong and Asia. Media plans always include some element of geographical targeting - aligning to TV regions is a typical technique.

But despite the extensive technology and rich clickstream data available to website publishers, they can often not even offer the same level of targeting as a national newspaper. Regardless of such problems, 2007 looks set to be the year when geodemographic targeting finally starts to take hold of digital media, delivering to advertisers the level of audience refinement they take for granted offline.

Lucy Stafford, media director at Tri-Direct, believes growing advertiser investment will inevitably drive better targeting. "Online media have proved that they can deliver results efficiently, even if the sophistication of targeting options is still at a fairly low level. Advertisers and media owners are finally opening up to using more pinpoint targeting options," she says. She notes that much of the attention on targeting has so far focused on time factors, such as day-part, rather than socio- and geodemographic information.

The low levels of targeting are down to three factors: media owners which do not offer the full range of options, advertisers that are not motivated to use them, and advertisers which misunderstand their capabilities.

Of these, the first is the most glaring omission, since many publishers require site users to register and log in, and therefore hold considerable personal data on visitors. "This may be due to technical inadequacies or simply the business being unsure of how to sell these targeting options. In some cases, they are priced out of consideration," adds Stafford.

Deal chasing is common with online advertising, as media buyers seek to achieve the lowest cost per acquisition. The main targeting tools have tended to be conventional media practices, such as capping the frequency of ad serving to unique visitors, or buying inventory more cheaply by accepting broader coverage.

"Part of the problem stems from advertisers' reluctance to test new targeting methodologies, and the ability to accurately assess their performance against standard methods," she says. Geographical targeting suffers from this in particular - the reliance on an IP address as an indicator of location is dangerous because it can make it appear that the right profile has been reached.

But, as Mike Teasdale, partner in agency Harvest Digital, says: "IP address is unreliable because of examples like Siemens, which uses one server to provide Internet access for the whole of its staff in Germany, so they always look like they are in Frankfurt; or Internet service providers like AOL, where all of the traffic goes through West Virginia into Europe." Any ad serving report which shows massive concentrations of traffic from such clusters needs to be treated with a great deal of caution. But with some of the most important sites on the Internet, such as Google, not requiring users to sign in at all, analogues for targeting like IP address are all there is.

But even registration sites need to be scrutinised carefully, since there is little validation of the data provided against offline reference sets. On some of the hottest Web properties, such as Facebook or MySpace, the nature of social networking means there is an inhibition against outright lying.

These sites are making it possible to undertake some remarkably precise marketing. According to Teasdale: "The police have approached one social network to target campaigns at specific gangs. They are hoping to persuade young people in certain areas to grass them up. That is micro-targeting."

For many media planners, the main profiling tool is derived from the comScore Media Metrix panel of Internet users, which gives a broad demographic indication. AOL subscribers are more likely to be over 35, whereas users of Lonely Planet are generally under 25, for example. Teasdale also believes that, with rising investment in online ads, efficiency naturally falls, which will create a push for tighter targeting.

One of the challenges around improving online ad targeting is the infrastructure involved. Virtually all ad content served via leading sites is stored on a third-party system, usually Double-Click or Atlas. For targeting to work, data needs to be associated with this content in realtime.

"MSN uses our Atlas Publisher, but not for behavioural targeting. Generally, what the technology is used for is optimisation towards cost per acquisition," says Damien Healy, operations director at Atlas Solutions.

Where behavioural targeting is applied, it is usually to target responders to ads who did not convert, so that they can be re-served with a promotional message once they return to a relevant website.

"That way, there is absolutely no wastage. You know they have previously been interested, they clicked through but didn't purchase. Perhaps they needed time to consider the offer, but they have shown interest, so it's important to target them again," says Healy.

The ability to track online behaviour in this way has been one of the most appealing aspects of digital advertising. It moves even pure brand awareness work towards the efficiencies of the direct response model. But behavioural targeting in the absence of geo- or sociodemographic targeting is still only relatively effective.

Online advertisers, publishers and media buyers conform to the Internet Advertising Bureau's code of practice on data privacy. While it is critical to establishing confidence around e-commerce and online media, it limits the ability to target. Significantly, Google has publicly stated that it will not use individual-level data for targeting, although MSN and Yahoo! have yet to make similar commitments.

"There is a clash between targeting and privacy," says Healy. "From the advertisers' point of view, they want to be as targeted as possible, and want to know that the person they are serving an ad to is exactly who they say they are. From the consumer side, it could be considered that their privacy is being compromised."

The recent furore over the release of a set of AOL subscriber data for research purposes is a case in point. Despite only providing IP addresses, inferred data from the searches being carried out allowed some individuals to be specifically identified. While the ad industry might well carry out such analyses behind the scenes, the public is not yet ready to accept the fact.

"A good example is MSN Messenger. At the foot, there is space for a button-sized ad. But some users have been complaining about the network selling their profile data," says Dax Hamman, international operations manager at Bluestreak, which provides an ad-serving platform to both advertisers, media buyers and publishers.

"The point at issue is whether publisher-side ad serving tools will be integrated with log-in to their websites. Third-party tools like ours purely track anonymous data. We know where somebody has clicked - the publisher knows their demographics," he says.

Auditing the way inventory has been delivered via a third-party service is an important check on just what publishers are doing with ad content. It is all too easy for an agreed volume of 100,000 ads to be served up without the right filters having been applied, meaning that 30,000 could have been seen by the wrong profile entirely. "The media owner will try to optimise inventory towards cost per 1,000. The media buyer is trying to optimise towards cost per acquisition. There is a middle ground between the two," argues Hamman. In the right context, geographical targeting is not only possible but acceptable to website users. A prime example is UpMyStreet.com, which over 1 million people visit every month to get information on their local or target area, using postcode or town name.

"We do match ads to profiles, and have done so for the last five years. We are probably the only website that can do very accurate geo-targeting campaigns," claims Mark Haupt, head of sales. He estimates that up to 20 per cent of advertisers are asking for some form of socio- or geographical targeting in this way.

One reason why UpMyStreet can apply targeting without a consumer backlash is that 70 per cent of users only enter geographical information to determine content, without formally registering. The site can then pull in Acorn profiles associated with the postcode. "Increasingly, advertisers have started to buy using Acorn groups. You would expect with the amount of information available that it would happen more often. But planning/buying online is at an early stage. It is up to us as media owners to promote it and tell people what to do," says Haupt. Until this happens, a gap is being left which some third-party service providers are looking to fill. Wunderloop has been set up to carry out exactly this kind of data matching to online behavioural profiles.

"At the moment, advertisers are still buying by type of site. For example, a car company will buy Topgear, AutoTrader and Parkes because that is where the buyers are. For me, that's not enough. If you find the clicking path and demographic of a potential buyer, once he comes back elsewhere on the network, you can serve him a car ad there," says Hamilton.

The wider adoption of tools that allow clickstream data to be associated with socio- and geodemographics is only a matter of time. The amount of money being spent through online advertising is simply too large, and growing too fast, to accept inefficiency. It is time for the talking about data to stop and the online action to start.