I’ve discussed before how privacy/spyware concerns are going to restrict behavioral targeting related spending by big, well known brands.

This might be the first step in that process. From the article:

THE FEDERAL TRADE COMMISSION’S efforts against adware have so far focused on the supply side by filing lawsuits against companies that unlawfully install ad-serving software. Now, one agency commissioner says it might be time to target demand, by naming the big brands that use adware to market their products.

“A little shaming here might go a long way towards protecting consumers’ safety and privacy,” said the FTC’s Jonathan Leibowitz

It is important to note that this effort is not just associated with Spyware, but with any behavioral targeting technology:

Walter Mossberg, tech columnist for The Wall Street Journal ,went even further — condemning not just adware and spyware, but also cookies placed on consumers’ computers by ad-serving and analytics companies that he said “are under the delusion that it’s okay to force their way into our computers for advertising, marketing and research purposes.”

The recent subpoenas of search engine records has restarted the discussion over internet privacy.

One of the least surprising aspects of this discussion is the lack of public knowledge about their lack of privacy on many internet services. For example, a recent survey found that 77% of Google users don’t know that Google stores personal information about them. From the article:

Google maintains a lifetime cookie that expires in 2038, and records the user’s IP address. But more recently it has begun to integrate services which record the user’s personal search history, email, shopping habits, and social contacts. After first promising not to tie its email service to its search service, Google went ahead and opted its users in anyway. It’s all part of CEO Eric Schmidt’s promise to create a “Google that knows more about you”.

That’s a big problem. It is clear why Google is resisting the subpoenas. I am sure Google is in part motivated by some altruistic desire to protect people’s privacy. However, a large part of this, I would bet, is driven by the realization that if consumers don’t even know data is being collected, seeing you willingly turn it over to people has the potential to cause a huge backlash. In other words, it is damage control or prevention, depending on how you think about it.

The real danger in all of this, I think, is the impact on behavioral targeting. I have believed for a while that behavioral targeting is doomed in the long run, because of the tactics that have been historically employed to gather the information. If a well known company like Google can collect personal data without the majority of their users realizing it, imagine how many of the “adware” companies truly have consumer buy-in. My guess – not very many.

Until we have a real opt-in system, one in which consumer privacy comes first, in which there is full disclosure it will be a dangerous area for large brand advertisers.

This a dangerous area for brand advertisers, the ones who will fuel online advertising growth. Nobody wants to be associated with large consumer backlashes. They are bad for the brand, and bad for the business. And behavioral targeting, in my opinion, presents too great a PR risk at the present time.

The solution is a real opt-in system, in which there is full disclosure of what is being collected, full ability to edit or restrict the collected information, and complete trust that the terms and conditions will not change at a later date. John Battelle today called for something similar, namely:

- Access to a record of all the information they keep on us and how they use it
- The ability to challenge that data’s accuracy, and edit it for accuracy
- The ability to opt out (with a clear understanding of the resulting loss of services and opportunities that might result)
- The ability to set permissions as to who else might see the data
- The right to maintain a user copy of that data for archival purposes
- The right to share in the value of that data on negotiated terms

Amen.

Only when that type of solution is available will brand advertisers truly be safe playing in the “behavioral” realm. The first companies that get there will find a receptive audience ready to spend.

Eric Goldman has a great overview of the state of “Regulating Marketing Delivery” on his Technology & Marketing Law Blog.

Definitely worth reading.

Apple is getting into a little trouble with their new iTunes release:

From Kirkville: “Yesterday’s update to iTunes 6.0.2 comes with a surprise: it’s spyware and adware. … Apple has overstepped its limits, and this spyware (because it sends information to a server) and adware (because it displays information to attempt to sell you products) is a very serious breach of the trust I have long had in Apple’s products.”

Perhaps more troubling than the actual activity is the way that Apple has done it. From Boing-Boing: “As Marc at Since1968 points out, there’s no language in Apple’s privacy policy that addresses this specific behavior.”

That, for me, is the heart of the matter. In order to make good on the promise of ever better personalization, and to help consumers improve their Return on Attention, you need to collect information about them. If Apple were upfront about this, and provided a clear and easy way for people to either opt-in or opt-out (opt-in is better), this would never have become an issue. Interested consumers would have embraced the new feature, the same way they have embraced Attention Recorder.

Problems only arise when you violate consumers’ trust and take their privacy lightly.

Jeff Matthews has a fascinating post deconstructing a recent FTD Press Release. Worth reading the whole post, but I will excerpt the key points here. The press release says, in part:

“During the Christmas season, certain online search engine costs increased significantly over the prior year, and as such we made the decision not to pursue the resulting high cost order volume.” stated Michael J. Soenen, President and CEO of FTD Group, Inc. “As a result, despite this slight decline in order volume for the Christmas season, we are reiterating our EBITDA and EPS targets for the year. Further, we have begun making additional investments in our marketing staff to help build a more diversified marketing portfolio.” (emphasis added)

As Jeff rightly points out, this likely means “the marginal cost of a new customer has reached parity with the marginal profit from that customer. Which is not something anybody expected happening any time soon.”

This is a potential huge problem for search engines – if there is no net value, growth will slow and possibly even go negative.

How widespread an issue is this? I don’t know. But there are some reasons to believe it could be an emerging widespread problem. After all, search queries are pretty concentrated in a small number of topics, including shopping. And, as Nick Carr pointed out a few days ago, the click economy incents publishers to figure out how to get consumers to click. Quality of lead flow has not traditionally been an issue of concern for search engines; their model is pay per click, not pay per acquisition (unlike, say, Amazon’s affiliate model). It will have to start being a concern soon, if this data point starts to morphs into a trend.

UPDATE: Battelle and Carr have both picked up the thread…

From AdWeek :

“Well over half of users believe Internet tracking cookies invade their privacy, according to a new poll.

In a survey of 150 Internet users, 64 percent said cookies represent an invasion of their privacy. The poll was conducted by online ad network Blue Lithium, which recruited participants through banner ads.”

I haven’t seen the details yet (and recruiting via banner ads does not seem terribly sound and that is a small sample size. But I digress…). But the Behavioral Advertising folks everywhere should continue to be worried. Cookies have been around a long time (“The Blue Lithium survey… found 83 percent of respondents claim they are familiar with cookies”), and rightly or wrongly, consumers still have concerns. Unless the industry figures out a way to make more people comfortable with this, they are at serious risk for a backlash and/or regulation.

This is also going to continue to be a large roadblock for brand advertisers. As a friend at P&G told me a little while ago, it is just too risky when consumer sentiment is so negative.

Couldn’t say it better myself, so I figured I would just alert everyone to jd’s post at his Grain of Salt blog:

“…ultimately, I want every bit of every (AttentionTrust member) page I view to be 100% relevant to me. In my perfect world, this relevancy would come in the form of ad-free content. But I’m not so foolish as to think that my inattention to (in the form of not clicking on) the ads you display will cause them to magically disappear. So if you insist on cluttering up the content that I came for with things that I did not, at least take the time to analyze my existing attention data and make use of it.“

(emphasis added)

Picking up on my last post, my wife and I just stayed at the Four Seasons Scottsdale to celebrate our first anniversary. This was my first experience staying at a Four Seasons for anything but a quick business trip, and it was wonderful. One of the things that struck me the most was how personalized the experience was. From the moment I made the reservation (on the phone), they started discretely asking questions – was this my first time staying, were we there for business or pleasure, special occasion, etc. Conversational, to the point that I almost didn’t notice that I was being questioned.

When we got there, we were greeted with a Happy Anniversary. At the restaurant that evening, the Maitre D, waiters, staff all knew it was our anniversary. At the end of dinner, brought us out a complementary Happy Anniversary desert. This happened throughout the stay, always discrete in the Four Seasons way.
I can see some ways in which a technology-only solution could have figured this all out (although Hilton, with all their CRM technology, didn’t on our wedding night, despite the fact we had also blocked a dozen or rooms rooms for our wedding guests, and that I am Diamond in their HHonors program).

But the “Just Ask Them” approach the Four Seasons uses guaranteed a highly personalized, and enjoyable, stay.

Via Battelle:

“Raul Valdes-Perez of Vivisimo begs to differ with all the hype around personalized search (including in my book), and the idea of major engines mining your clickstream to better understand your intent (and give you more personalized ads, of course). In a short paper outlining his views, (PDF download), he outlines five major problems with personalized search and concludes:

…. search personalization is likely to waste the talents of top computer scientists. It may even give worse results…”

The key problem brought up in the paper is that of inference. Can you infer what a person wants from the actions she takes? This is not only an issue for search – it is, more broadly, a key issue for behavioral advertising as a whole.

Valdes-Perez ended the article by saying “the best personalization is done by persons themselves”. At a high level, I agree. I’ve wondered for a while why few people have really explored the approach that I’ll call “Just Ask Them”.

Perhaps the best targeted advertising system around is Amazon’s book recommendation system. They are successful precisely because they use information provided by other users to help you find what you are looking for. Yes, there is a lot of math involved, but the math is “just” to automate the understanding of the volunteered information.