November 17, 2011
How To

Online Behavioral Advertising: How to benefit from targeted ads in a world concerned with privacy

SUMMARY: Targeted advertisements and privacy continue to be issues of interest to marketers, advertisers, consumer groups and governments. Online behavioral advertising is subject to self-regulation in the U.S., and actual legislation in the European Union.

This how-to article offers five tactics provided by two experts in the field on understanding the issue, specific steps to take, a look at the regulatory issues in different markets, and how transparent marketing helps to solve consumer concerns.
by David Kirkpatrick, Reporter

Online behavioral advertising (OBA) is conducted by using third-party tracking. This means a tracking device -- in the form of, for example, a cookie -- is used to collect and analyze the behavior of a computer user.

The third-party element comes into play because the tracking is likely taking place by another company than the owner of the website hosting the ad, and the information collected is shared with many companies through organizations such as ad groups.

The tracked computer user information is compiled and used to create a profile that effectively segments that computer user for highly targeted ads. If the profile indicates the person probably likes dogs, but doesn’t like cats, they would not receive ads for cat food, but might for dog treats.

Third-party tracking is a bit of an online privacy minefield. Consumers can be wary of marketers who they sense are creating “profiles” without their knowledge. And perhaps more importantly, third-party tracking and consumer privacy is certainly, at the very least, on the radar of government and consumer protection groups, if not already subject to regulation in certain markets.

To find out what marketers should know about OBA and privacy, MarketingSherpa spoke with two experts in the field:

Genie Barton, vice president and director, Online Interest-Based Advertising Accountability Program and Mobile Marketing Initiatives, Council of the Better Business Bureaus/National Advertising Review Council. The CBBB and NARC are two related organizations that provide self-regulatory programs for online advertisers. NARC provides policy guidance and the CBBB is the umbrella group that administers the program.

Scott Meyer, founder and CEO, Evidon, a dedicated provider of privacy and compliance solutions for digital media. Evidon helps companies comply with privacy regulations and self-regulation programs in North America and Europe.

This how-to article provides five tactics that will help you understand online behavioral advertising and privacy, actual steps to take, a look at the regulatory environment around the world, an explanation of the AdChoices icon, and finally, why transparent marketing is simply good business.

Tactic #1. Understand what you need to know about OBA

To make effective marketing choices regarding online behavioral advertising, Meyer provided three key points to understand:

Privacy is a security and performance issue

“Marketers need to understand that privacy is actually a security and performance issue as much as it is a regulatory one,” he said. “The first step every marketer needs to take is to inventory all your own websites to first understand what types of third-party tracking technology is there and what cookies are being placed on consumers browsers when they visit your site.”

This is known as a “cookie audit.” It’s important because third-party tracking code can slow down your website. Not only that, but targeting data can leak out to companies you may not even know about.

There are a number of players involved in OBA and third-party tracking, including:
  • Ad servers

  • Agencies

  • Ad networks

  • Exchanges

  • Data aggregators

  • Demand-side platforms

Provide Web visitors with information on any tracking and the opportunity to opt out

Meyer likened this to nutrition labeling on food packaging.

He stated, “Once the brand knows what is on its sites, the next step is to show consumers what the ‘ingredients’ are in the ads they see, and give them the ability to learn more and to opt-out of targeting if they so choose.”

Meyer added, this disclosure is the law in the European Union (EU) and is a requirement under the United States Self-Regulatory Program for Behavioral Advertising , also known as the “AdChoices” icon program (see tactic #4 for more on AdChoices) created by the Digital Advertising Alliance under pressure from the Federal Trade Commission.

Provide consumers with transparency

Giving consumers control over their data and how it’s used is good for business.

“Recent research conducted by marketing research group Millward Brown showed that 67% of consumers feel more positive towards transparent brands, and they are 36% more likely to buy from these brands,” stated Meyer.

He added companies that are not compliant are “at their own peril” from regulators in the U.S. and EU, and, “they will also see diminished business results.”

Barton summed this topic up from the consumer’s perspective, “We understand that a first-party relationship between a consumer and a website where they have chosen to go to transact business is likely to be one where the consumer expects to have that information gathered.”

She continued, in that business transaction, the customer doesn’t expect their data to be transferred to third parties they don’t know anything about. Keeping the customer’s privacy in mind means ensuring they understand how their data is handled and providing the choice to allow it to be used to create online profiles.

Tactic #2. Take steps to manage OBA tracking and privacy

Once you understand the issue and how it might affect your advertising policies, there are actions you can, and should, take in regard to third-party tracking and privacy.

Barton said anyone engaging in OBA should be providing “notice and choice,” stating on the website how they handle third-party tracking and provide an opt-out.

Notice and choice is just as it sounds. Visitors should be informed about tracking activities that are part of the website (including individual ads), how that data will be used, and the opt-out ability from tracking provides choice on the part of the website visitor.

Meyer provided a three-point checklist for companies engaging in OBA:
  1. Identify an internal team responsible for this set of issues. He said this team is usually small and consists of senior members from Marketing, Legal and IT (for website issues). If you use an ad agency, this team will include that organization as needed.

  2. Conduct the cookie audit and set up a workflow to manage third-party tracking on your websites.

  3. Comply with the relevant programs and/or regulations (see the next tactic).

Tactic #3. Understand the compliance and regulatory landscape around the world

The regulation and compliance issue with online tracking is a shifting field. Governments and consumer groups alike are looking into the issue around the globe.

In the United States, groups such as CBBB, NARC, the Digital Advertising Alliance and the Direct Marketing Association are working to keep the issue in the hands of marketers and advertisers (instead of government agencies) through self-regulation.

To comply with this program, Meyer said U.S. advertisers should:
  • License the Ad Choices icon from the Digital Advertising Alliance (see tactic #4 for more about the icon).

  • Place the icon on every ad and page that collects or uses behavioral data.

  • Provide a transparency and control solution for consumers to be able to opt-out of targeting by clicking the icon.

In Europe, the situation is very different with tighter privacy requirements.

The ePrivacy Directive is now a law in the EU, and each of the 27 member states is required to pass a version of this legislation.

The directive has several key components:
  • “Informed consent” for the collection and use of consumer data. Unfortunately for advertisers and marketers in the EU, the actual definition of informed consent, in terms of the types of cookies that require consent and whether consent can be implied based on browser settings or will require explicit opt-in, is still under debate.

  • Notice on collection and use of European consumers’ data.

  • Provide consumers the means to control how their data is used.

  • This directive applies to all cookie use, and not just OBA.

As you can see, essentially the self-regulation of the U.S. and the legislative directive of the EU are very similar, with one significant difference. Once some of the details are worked out and each EU state has its version of the law in place, the EU will have actual teeth to go after any companies not in compliance.
Barton said she believes the U.S. self-regulatory approach is actually a better way to handle online privacy.

“Because [the Internet] is a very complicated ecosystem, constantly evolving, it needs the flexibility of responsiveness by the industry to changes in technologies,” said Barton. “What happens when you pass laws, very often, is that they cannot keep up with the technologies.”

However, marketer non-compliance with self-regulation makes U.S. government action more likely.

Tactic #4. Understand and use the AdChoices program icon

You have most likely seen the AdChoices icon on advertisements around the Web. The icon designates an ad that is served through behavioral targeting, and is the symbol of the Digital Advertising Alliance’s Self-Regulatory Program for Online Behavioral Advertising, also known as the AdChoices program.

This program provides businesses with the means to provide consumers transparency and control over their online data. One purpose of the program is to eliminate the need for more heavy-handed government regulation in the U.S.

The CBBB and the Direct Marketing Association enforce the program, and compliance is required for all of the various Digital Advertising Alliance member organizations.

For consumer marketers, the AdChoices icon provides an opportunity to take control of the notice and a key element of the self-regulatory program. Essentially someone -- the website owner, the ad group or the advertiser -- involved in the process of third-party tracking has to provide consumers with that information and option to comply with the DAA’s program.

If you are not serving third-party ads on your website, that eliminates some responsibility. But as a marketer advertising through banner ads or ad groups, do you really want to trust either the websites hosting your ads, or the ad groups serving your ads, with providing your customers with a satisfactory experience in transparency?

By making the AdChoices icon part of your online ad, you are giving your customer the required information and opt-out choice. The message comes from you and not another player in the third-party tracking.

Tactic #5. Marketing and advertising transparently is good for business

In many ways, all roads lead back to the idea of transparent marketing. Both Barton and Meyer repeatedly invoked the benefits of just letting your customers know how their data is going to be handled and offering them the choice to not be part of targeted advertising.

And really, do you want to spend money serving ads to someone who doesn’t want to see them, or would you prefer to market to an informed consumer who sees value in receiving targeted ads? Meyer stated that tracking technology on your website is another consideration.

“This is an ROI issue,” said Meyer. “Taking control of the tracking technology on your own website and in your ads can help you manage your valuable targeting data, and, at the same time, improve the speed and effectiveness of your websites.”

He added that consumers benefit from transparent marketing because with more accessible information, they can manage their online profiles, opt-out of tracking if they choose, or can just simply see what data is being collected and from which websites.

Barton explained that marketers benefit by not marketing to people who don’t want to be marketed to, and consumers benefit because they are provided ads that reflect their interests.

She also stated, “Commerce on the Internet only increases when there is trust between consumers and marketers. You transact business on the Internet if you believe that your data is protected and that you have choice about how marketing takes place.”

For marketers who might be concerned the consumer is being given too much control, Barton offered an interesting example.

She said when companies actually offer consumers the chance to look at their user profile -- demographic information, likes and dislikes, etc. -- instead of just immediately opting out of any targeting based on the profile, some consumers will actually conduct data hygiene on their profile by clarifying and correcting incorrect data points.

And, in the end, giving customers more of what they want and less of what they don’t is the goal of online behavioral advertising.

Useful links related to this article

Creative samples:
1. AdChoices icon
2. AdChoices example

Council of Better Business Bureaus

National Advertising Review Council


The Self-Regulatory Program for Online Behavioral Advertising

Creating Better Online Ad Campaigns: 5 Tactics

Choose the Right Ad Network: 5 Tactics to Understand Targeting and Reporting Options

Online Advertising: Behavioral Ads Threatened

Database Marketing: Is Someone Examining You Right Now?

Transparent Marketing: How to earn the trust of a skeptical consumer

5 privacy factors to consider when using marketing automation

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