Real-Time Bidding and the 85%*

*of people that don’t delete cookies.

Online advertising real-time bidding (RTB) made the New York Times magazine section on Sunday, where it will be read by around 1.6 million people.  Expect lots of discussion around the horrors of online privacy invasion as a result.

It’s a good article, and worth the read.  And while we all believe online privacy is important, people seem to have forgotten the days when most information wasn’t free.  Want to read the news, or check stock prices?  Buy a newspaper.  Want to keep up with current events without buying a paper or magazine?  Then tune in to watch the news being drip fed to you by TV anchors.  Ugh.  That was not that long ago, people.

Most internet content is free for one reason.  Someone is willing to pay for it.  And that someone is the advertising community.

In the first half of 2012, internet advertising revenues climbed to an all-time high of $17 billion in the US alone, according to the Interactive Advertising Bureau.  That is serious business.  Without this revenue stream, it’s unlikely that we’re getting all this “free” internet content.

What does this have to do with RTB and targeting?  Data, cookies, and targeting is the lubricant that makes RTB possible.  Consider that less than one in a thousand people will click on a typical banner ad.  So the more accurately an advertiser can target a user with an ad, the more likely it is that the ad will resonate with that user (whether it’s to generate a click, or to “lift” their “brand,” or whatever it is the advertiser is looking to achieve with their advertising campaign), and the more that the advertiser is willing to pay to serve the ad as a result.  That’s a big part of what RTB does.

The existence of a real time marketplace that allows advertisers to finely segment the user, page, location, time of day, and myriad other criteria, is driving ad revenues up.  Take away the ability to target users based on their interests, and we can expect ad campaign metrics to decrease, and ad revenues to follow suit, taking a toll on the freshness and quality of online content that publishers can afford to make available.

I would argue that targeting is healthy for the future of the internet.  But at the same time no one wants to see ads that violate their privacy.

So what to do?

1 – First, if seeing targeted ads is really so horrid for you, delete your cookies.  According to the NY Times article, “fewer than 15 percent of Internet users turn off or limit their cookies, according to surveys.”  When you delete your cookies, you completely delete your surfing trail.

Here’s an interesting test:  Go to BlueKai’s website and look at what it knows about you (per the NY Times article).  Wow, that’s alot of information.  Now delete your cookies and try it again.  Voila!  You can even set your browser preferences to delete cookies every time you quit a browsing session automatically.  Don’t forget to delete your Flash Cookies too.

Seems like a pretty simple solution to all of this brouhaha around online privacy.

One might argue that if everyone regularly deleted their cookies, that the advertising industry would suffer, and online content would suffer from a funding shortfall, just like if we completely blocked the ability to target users.  But that’s probably not the case.  Let’s assume that starting tomorrow, cookies are allowed to live for no longer than 3 days.  The advertising technology industry is filled with super smart analyst types that can figure out ways to deal with this new snag.  We can accurately discern patterns of behavior and interests even from cookie lifetimes of less than 3 days.

So when I start browsing again with a fresh cookie, I’m anonymous but I can still be targeted effectively based on aggregated, anonymous targeting algorithms from pools of behavior that are based on 3 days of browsing activity.  That means that I’m seeing ads that are reasonably relevant for me, and the advertisers are still relatively happy, but the shoes I looked at 4 days ago will stop following me around the internet and creeping me out.

2 – Change DNT as it stands today.  The current Do Not Track initiative is likely to go nowhere.  Microsoft turns on the Do Not Track header by default in its new Internet Explorer 10 browser, which tells advertisers not to serve any targeted ads to that browser.  So what does the advertising industry do?  They say that any time they see an IE10 browser with DNT:1, that it was set by default by the browser and not intentionally by the user, and they ignore the setting. 

Instead of DNT as it currently exists, why not set cookie lifetimes to 3 days by default?  Seems like a workable compromise.  Then the data scientists can spin off and work on high accuracy targeting algorithms that find ways to optimize the performance of ads using three days of browsing history as the data sets for the analytics.

3 – Institute additional, stringent rules that limit the ads that can be served.  Whether it’s a medical condition, extramarital activities, whatever, we should create and enforce strict limits regarding what’s OK to display to an online user. Targeting me with a Viagra ad because I read about its side effects, or worse, because I typed ED into Google and hit enter before I could type Sullivan right after it, should definitely be off limits.  Seriously.

It’s naive to think that targeted online advertising is going away.  Ask someone if they want privacy, they’ll say yes.  But tell them that it comes at the cost of the internet no longer being free, and you’ll get a very different answer.

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