Google has long resisted the emerging but controversial method of showing ads to Web surfers based on the kinds of sites they've previously visited. The company appears to have gotten over its reservations.
On Mar. 11, Google (GOOG) said it will begin to offer ads using what is known as behavioral targeting, which tailors ads to people's interests and online behavior. 'We're looking to make ads even more interesting,' says Brad Bender, a Google product management director.
To date, Chief Executive Eric Schmidt has eschewed behavioral targeting, citing concerns over its hidden nature. Google's brand of targeting"”which it calls interest-based advertising to avoid the negative connotations associated with behavioral targeting"”will give users an unusual amount of control over whether and how they're tracked and targeted.
Testing for a 2009 rollout
Behavioral targeting, used by sites such as Yahoo (YHOO) and the middlemen known as ad networks that broker advertising to most Web sites, uses electronic markers on people's Web browsers called cookies to track what sites people visit. If someone has visited several car sites, for example, General Motors (GM) might want to target an ad to her as she roams the Internet. Or if someone else placed a cell phone in an Amazon.com (AMZN) shopping cart but didn't buy it, he might be shown an ad for that phone on other sites.
Google's targeting involves placing people"”or more accurately, the Web browser on their computer, minus personal information"”into one or more of 30 broad categories and 600 subcategories, such as baseball fan or luxury car seeker. In the first couple of weeks of the program, still in test mode, 20 to 50 advertisers approved by Google will run ads, though the program will roll out far more widely later this year.
To help advertisers place ads, Google will cull information from its content network"”the thousands of sites where the search giant places text and pictorial display ads related to the content of those pages. The vast network ranges from little-known blogs to such large sites as those for Amazon.com, BusinessWeek, and The New York Times. Google will not use data from users' Google searches to target ads.
The quest to make ads useful
The moves are aimed at helping Google make greater headway in the $8 billion display ad market, where it has less than a 2% share, virtually all that from its YouTube video site. Unlike search ads, which appear next to search results and therefore indicate overt interest in a topic or products, display ads often are not targeted to people's interests. As a result, to advertisers' increasing dismay, they're often ignored. In the coming years the new approach 'has real revenue potential' for Google, says Scott Kessler, an analyst at Standard & Poor's, which like BusinessWeek.com is owned by The McGraw-Hill Companies (MHP). 'It should also have a favorable impact on profit margins.' It's unlikely to have a significant impact on Google's revenue this year, however, Kessler says.
Susan Wojkicki, Google's vice-president of product management, outlined the new targeting on the official Google blog on Mar. 11. She said it fits with the notion of Google co-founders Sergey Brin and Larry Page that ads can and should be at least as useful to people as search results and other online content. 'We believe there is real value to seeing ads about the things that interest you,' she wrote.
The idea is that if these ads can be targeted to people's apparent interests, they will be more useful. Viewers will consequently be more likely to click on them or otherwise respond. As a result, Google and other companies using behavioral targeting hope they will be able to charge more for such ads. As rates for display ads have dropped in recent years, many companies have been hoping that behavioral targeting would help reverse the trend.
Avoiding the 'Truman Show moment,'
In the last couple of years, however, behavioral targeting has itself been targeted by privacy and consumer advocates. They worry that people's privacy could be violated and that targeting tactics could more easily woo consumers into buying products they don't necessarily need.
Google, which bought the online ad placement firm DoubleClick last year as part of a planned move into display ads, is taking several steps to avoid what some call the 'Truman Show moment,' a reference to the movie in which Jim Carrey's character suddenly discovers he's the star of a long-running TV show that tracks and broadcasts his every move.
For one thing, Google is labeling ads so people can click to find out more information on how the company shows ads. It also has built an online tool called Ads Preferences Manager, which lets people view, delete, or add interest categories. It's also offering consumers the ability to opt out of the ad-targeting cookie, as well as making available a browser add-on that maintains that choice even if users delete all their cookies, as some do.
Some privacy groups think that's still insufficient. Jeff Chester, executive director of the public policy group Center for Digital Democracy, said that while giving people access to their data profiles is a 'step forward,' he views it as the company's effort to 'dodge a privacy-regulation bullet.' Indeed, there are moves in Congress to set rules on behavioral targeting.
Promising 'transparency and choice'
Chester said he would prefer that Google and others require people to opt in to being targeted rather than be forced to find the way to opt out. He also plans to ask Google not to target anyone under 18 and to describe in more detail the methods by which it targets.
No doubt Google"”already under a microscope for its dominance in search advertising"”will be watched closely as it moves into this controversial new area. It will have to avoid a number of privacy pitfalls to maintain the trust of its users. Indeed, Google took the offensive this morning with a post on its public policy blog by Deputy General Counsel Nicole Wong outlining the 'transparency and choice' Google says it's offering with its brand of targeting.
That won't likely mollify critics much. But some privacy advocates privately admit that they won't be able to stop behavioral targeting entirely. Clearly, Google is assuming that most people won't mind"”and might even welcome"”more targeted ads. 'Most users prefer more relevant ads to less relevant ads,' says Google's Bender. Google won't track sensitive categories such as health and religion.
It's likely that the entry of Google, whose brand carries a lot of weight with consumers, will help make targeting more pervasive"”if advertisers can resist the temptation to go too far.
Hof is BusinessWeek's Silicon Valley bureau chief.