Targeted Advertising for Cable TV & Skype

by on March 7, 2011 · 4 comments

We’ve said it here before too may times to count: When it comes to the future of content and services — especially online or digitally-delivered content and services — there is no free lunch. Something has to pay for all that stuff and increasingly that something is advertising.  But not just any type of advertising — targeted advertising is the future. We see that again today with Skype’s announcement that it is rolling out an advertising scheme as well as in this Wall Street Journal story (“TV’s Next Wave: Tuning In to You“) about how cable and satellite TV providers are ramping up their targeted advertising efforts.

No doubt, we’ll soon hear the same old complaints and fears trotted out about these developments.  We’ll hear about how “annoying” such ads are or how “creepy” they are.  Yet, few will bother detailing what the actual harm is in being delivered more tailored or targeted commercial messages.  After all, there’s actually a benefit to receiving ads that may be of more interest to us. Much traditional advertising was quite “spammy” in that it was sent to the mass market without a care in the world about who might see or hear it. But in a diverse society, it would be optimal if the ads you saw better reflected your actual interests / tastes. And that’s a primary motivation for why so many content and service providers are turning to ad targeting techniques. As Skype noted in its announcement today: “We may use non-personally identifiable demographic data (e.g. location, gender and age) to target ads, which helps ensure that you see relevant ads. For example, if you’re in the US, we don’t want to show you ads for a product that is only available in the UK.”  Similarly, the Journal article highlights a variety of approaches that television providers are using to better tailor ads to their viewers.

Some will still claim it’s too “creepy.” But, as I noted in my recent filing to the Federal Trade Commission on its new privacy green paper:

If harm is reduced to “creepiness” or even “annoyance” and “unwanted solicitations” as some advocate, it raises the question whether the commercial Internet as we know it can continue to exist.  Such an amorphous standard leaves much to the imagination and opens the door to creative theories of harm that are sure to be exploited.  In such a regime, harm becomes highly conjectural instead of concrete. This makes credible cost-benefit analysis virtually impossible since the debate becomes purely about emotion instead of anything empirical. …

Importantly, nothing in the Commission’s proceeding has thus far demonstrated that online data collection and “tracking” represent a clear harm to consumers per se, or that any “market failure” exists here. Such a showing would be difficult since using data to deliver more tailored advertising to consumers can provide important benefits to the public..

I’ve already noted one possible benefit to consumers: ads that are more relevant to them and, therefore, potentially less “annoying.” But the far more important benefits would be (1) keeping costs for content and services reasonable, and/or (2) just keeping that content flowing or those services in business. I go into more detail about both of these potential benefits in my FTC filing, but the reasoning here is pretty straightforward.  Again, advertising is the great subsidizer of the press, media, content, and online services. The reason we already have access to some much great content and so many great (and often free) online services is because of advertising.

But the market for content and services is becoming more cut-throat competitive every day. There’s simply so much stuff to choose from that both the content/service providers and the advertisers are being forced to evolve and change their business models. Locking them into to yesterday’s (or even today’s) advertising and marketing methods limits their ability to respond to competitive pressures and concoct more innovate models going forward.  Targeting will clearly be part of the mix, and if it can help companies continue to provide their content and services to the public — or, better yet, provide them at a more competitive price — then policymakers must take those potential benefits into account when considering privacy regulations, even if some feel such ads are “creepy.”  Again, it’s unclear how “creepiness” is a harm and, even if it is, it has to be stacked against the many potential benefits or more targeted forms of advertising.  There’s no guarantee those methods will succeed, of course, but they should at least be given a chance.

Again, read my FTC comments for more detail.  And let’s say it once more, with feeling: There is no free lunch!


Addendum: I just noticed this follow-up Wall Street Journal blog post by Jessica E. Vascellaro on “Calculating the Benefit of a Targeted TV Ads,” which concludes by noting that: “A test of targeted TV ads by Comcast in 2009 found that homes receiving targeted advertising tuned away from the commercials 32% less of the time than homes that received non-targeted ads.” Stated differently, those consumers seeing targeted ads found them 32% less “annoying”! And, again, more effective advertising means more dollars for content and services.

That also reminded me of this eMarketer article I saw last month on how “Targeting Boosts Low Facebook Click Rates.” It noted that:

Just as not all advertisers are created equal, neither are all ads. Facebook’s self-serve ad targeting platform provides marketers with a wide variety of options for narrowing down the audience for their campaigns and targeting them appropriately. And according to data from BLiNQ Media, targeting can provide a dramatic increase in ad effectiveness. Clickthrough rates for campaigns run through the company’s platform were 7.5 times higher for ads targeted with demographic characteristics or interest information gleaned from profiles than for ads that were not targeted.

Indeed, not all advertising is created equal, and more targeted forms of advertising could create more value for content creators, services providers, and consumers. If it’s given a chance, that is.

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