Conde Nast, Emap, Sky and Channel 4 have all jumped onboard the latest craze in online advertising: using behavioural targeting to boost their revenues.
Revenue Science and Tacoda, US firms recently set up in the UK, have been the main beneficiaries of the deals that have come thick and fast in 2007, while portals such as Yahoo! have developed their own increasingly sophisticated technologies.
July saw AOL acquire Tacoda for a reported price of up to $300m, signifying the importance of behavioural targeting to online publishers.
But what does behavioural targeting offer on top of standard banner advertising, and what privacy questions does it raise?
Online publishers often find that the inventory on the most popular areas of their sites will be booked up, while inventory in other parts remains available.
The relatively new science of behavioural targeting aims ads at the user, rather than basing them on the content of the web page, sorting users into different segments according to their interests and demography. Advertisers can then buy into these segments, utilising the remnant inventory (see box).
Increasing revenue
Emap and Conde Nast have become the first big magazine companies to employ the technologies, while other online publishers are looking to become involved.
Paul Goad, UK managing director of Tacoda, has just added Conde Nast to the firm's client list.
He says: "A lot of traditional publishers haven't had the spike in traffic that social network sites have enjoyed and this is a way of increasing revenue without having to increase the number of page views."
Richard Foster joined Future Publishing as digital director earlier this year, having previously set up Revenue Science's UK office as UK managing director. Future is currently assessing its behavioural targeting options.
Foster says: "Most publishers have realised that the advertising on their websites has a pyramid shape. The top-third is high-end - such as travel and motoring - and it has the least amount of inventory. At the bottom there is, depending on the site, e-mail, chat and homepages. The challenge is not selling out all the top inventory, but improving the value of the low."
The Revenue Science model gives users the tools to do these things. For example, Emap will be able to build a profile of its users by examining what they do and when they visit different titles within the group. They can define their interests and serve them relevant ads.
The Tacoda model involves building a network of online publishers. It then sells inventory to advertisers based on segments established through examining behaviour on this range of sites.
Tacoda faces a new challenger, however. While Microsoft, Google and Yahoo! have previously constrained behavioural targeting on their own properties, Yahoo! is set to be the first to break free.
Blake Chandlee, commercial director at Yahoo!, says: "We're looking at targeting consumers once they go off network and that involves working with third parties. This means signing deals that are consistent with Yahoo! from a branding perspective."
Chandlee wants to raise the proportion of media revenue coming from behavioural targeting from its current 7.5%, to between 10% and 12%.
For Guy Phillipson, chief executive of the Internet Advertising Bureau, behavioural targeting is a great new way to boost online ad spend, but he is wary of the responsibility it entails.
Profile-building
Consumers may have issues with companies building profiles of users by collecting data based on cookies, the files stored on a computer when users visit websites.
Phillipson says: "We strongly advise companies to be open and honest about what they do.
"A precedent is direct mail, where people can e-mail and opt out of receiving it. It might be good in the future if there was one place to go where people can opt out of behavioural targeting."
While the US has the Network Advertising Initiative, a project set up by behavioural targeting firms to educate consumers, Europe has nothing.
Consumers are largely unaware that data held on their computers is being used to build profiles, albeit anonymous profiles, and used for commercial gain.
Tacoda's Goad thinks that a programme of education about cookies is preferable to an opt-out scheme. As consumers become aware of behavioural targeting, they are likely to demand more control.
And with the new science growing at its current rate, that day cannot be far away
BEHAVIOURAL TARGETING - A DEFINITION
- Behavioural targeting is the process of tracking people's online habits and serving them ads based on the results. For example, behavioural targeting technology could track a person browsing on Yahoo!
- They would visit the motoring section before exploring another area of the site. Yahoo! could then serve the person car ads, having determined their interest in the topic
- This type of behavioural targeting is onsite only, but some firms specialise in networked behavioural targeting. This is where a company employs behavioural targeting technology across a range of websites for which it runs advertising
- If a user leaves the network of sites only to return later, the technology will recognise that and target ads based on their previous behaviour. Revenue Science is an example of the former, while Tacoda specialises in the latter.