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Behavioral targeting has caught the attention of the US congressional leaders, as privacy advocates grow concerned with the tremendous amount of web data collected by internet businesses such as ISPs and search engines. Consumers, lawyers, congressional leaders, and businesses are now opining regarding necessary disclosures and the appropriateness of targeting offers/advertising based on web visits and/or queries.

When it comes to behavioral targeting (using clickstream data), where is the fine line of benefit vs. "big brother"?

With petabytes of data available to ISPs, auction sites, search engines, and social networks, these companies are naturally seeking profits via targeting advertising based on the interests and inclinations of users as determined by clickstream data.

However, "targeted advertising" based on the recordings of queries, clicks and mouse scrolls is quite controversial as some privacy advocates think such targeting is invasive, while others worry about companies amassing–and storing–too much information on our behaviors.

Adding to the challenge, a recent New York Times article, "Web Privacy on the Radar in Congress", August 11, 2008 mentions, "There is no broad privacy legislation governing advertising on the Internet. And even some in the government admit that they do not have a clear grasp of what companies are able to do with the wealth of data now available to them."

Why is behavioral targeting getting such prominent play?
Annoyed with non-relevant advertisements, internet users are increasingly ignoring banner advertising, skipping flash programs, and deleting email offers. Behavioral targeting provides promise because based on the analysis of clickstream data, powerful applications are able to calculate customer affinities with fine precision and then tailor advertising according to predicted customer needs.

More relevant advertising suggests satisfied consumers as offers pitched relate more closely to web queries, companies can charge more for advertising, and advertisers benefit with higher click-thru rates and hopefully more revenues.

Companies that rely on web-based advertising for their business model see much promise in behavioral targeting. Indeed, for many social networking websites, behavioral targeting may be their only viable path to profitability.

MIT's Technology Review, "Part I: The Business of Social Networks", July/August 2008, highlights the difficulty of turning a profit for social networks like Twitter, Ning, Meebo and others.

The Technology Review article notes that, for example, when users search Google, they expect display advertising and even in some instances welcome paid advertising results because they're shopping for an item, or looking to supplement information in a buying decision. For social networks, however, Jason Calcanis, founder of notes that users are, "are busy in conversations and don't want marketing messages."

Thus the challenge for social networks is to provide value to their user base while creating a revenue stream that can sustain the business and pay back shareholders and/or investors. Increasingly that path is behavioral targeting of relevant advertisements in order to turn a profit. Let's be clear–"profit" is not a dirty word. However, some companies are pushing the limits of what many would find acceptable in behavioral targeting.

Case in point, the same Technology Review article details the well documented travails of Facebook's roll-out of the Beacon platform.

The article mentions, "Working with commercial websites like Blockbuster and eBay, Beacon tracked Facebook users' purchases and displayed them to their friends. The problem was that users were enrolled in the program automatically. If a user went to, say, the Blockbuster site and rented a movie, that information was automatically sent to everyone in her Facebook network. Online petitions and negative press ensued, and the program was clumsily scaled back."

Perhaps there was nothing inherently wrong with Facebook's approach to behavioral targeting; however the lack of disclosure was particularly galling to users and privacy advocates.

So where's the "fine line" where advertisers, consumers and companies win?

With the debate on privacy swirling, and Congressional action looming, I have questions for DailyFix readers:

* When it comes to targeting advertising based on customer behaviors (online or off-line) where's the fine line between customer benefit and "spooky big brother"?
* Is there a way to target customers based on their affinities–without actually invading their privacy? Barneys of New York seems to be doing it right. What do you think?
* Does "the line" get crossed when a consumer is targeted across multiple sites vs. one site?
* Done right, will behavioral targeting be Web 2.0's salvation (from losses to profitability)?

Continue reading "Behavioral Targeting - Where's the Fine Line?" ... Read the full article

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Paul Barsch directs services marketing programs for Teradata, the world's largest data warehousing and analytics company. Previously, Paul was marketing director for HP Enterprise Services $1.3 billion healthcare industry and a senior marketing manager at global consultancy, BearingPoint. Paul is a senior contributor to MarketingProfs, a frequent columnist for MarketingProfs DailyFix, and has published over fifteen articles in marketing, management, technology and healthcare publications. Paul earned his Bachelors of Science in Business Administration from California Polytechnic State University, San Luis Obispo. He and his family reside in San Diego, CA.