ISPs eye bigger slice of ad pie

Despite its Orwellian undertones, the latest behavioural targeting development is generating excitement, for Phorm takes a holistic view, says Jason Carter

Targeting online ads based on people’s surfing habits is not a new thing. Behavioural targeting has been a welcome development in online advertising, validated by the rapid uptake of technologies developed by the likes of Bluelithium and Revenue Science. Publishers collect information about what their users are up to online to be able to offer more refined targeting: the theory is that advertisers access more valuable audiences, and media owners are better able to monetise their inventory.

In the old days, online planners would mainly target audiences by environment. And while we would make our jobs sound sophisticated, much of what we did wasn’t rocket science. Trying to sell holidays? The obvious place to buy ads would be contextually relevant environments, such as a portal’s travel section. Hardly surprising that this often worked. Indeed, it still does and has done in all types of communications throughout history.

But there are some issues with this approach. As with any market, limited supply and high demand lead to inflation. This has been experienced in paid search where mature sectors such as finance have started feeling the pinch.

Behavioural targeting represents a different way of doing things. It isn’t about reaching people where they are, it’s about targeting them by who they appear to be. For example, Yahoo! can identify mortgage seekers as those who visit their mortgage content and then serve timely ads elsewhere on the Yahoo! network of properties, perhaps while they’re checking their e-mails.

Until now most “behavioural targeting” has been done at a site or network level but Phorm – which launched this month – is moving the game on. By teaming up with internet service providers it will collect behavioural data at the gateway.

Working initially in the UK with BT, Talk Talk and Virgin Media, Phorm will monitor customers’ behaviour in its entirety. This is where things differ from other approaches which observe only segments of people’s online actions, such as intra-site or across a cluster of properties. Phorm will have a clear view from the top of the mountain rather than one of its valleys.

There will obviously be questions about privacy but Phorm has this covered. Users are anonymous and once an audience match has been made no data is retained. While some people will opt out, just like there are some who delete cookies, most will not. Ultimately, as Google’s vast coffers verify, people are not necessarily averse to advertising if it is relevant to them and not too intrusive.

A travel operator, for example, could target ads to an audience only if they have been to search engines and keyed in phrases such as “Caribbean holidays”, looked at Lonely Planet’s Jamaica website and read pages of a competitor site heavy in conterelating to package holidays. It may seem like something out of 1984, but it’s got a lot of people excited.

Publishers and advertisers connect via Phorm’s marketplace – the Open Internet Exchange. Within the OIE advertisers define how much they are willing to pay for their uniquely defined audiences. Publishers set the minimum they want to receive. Phorm’s technology does the rest, by using the insights garnered from the internet service provider (ISP) to add a layer of value-adding targeting. Space goes to the highest bidder.

On the surface it seems a winner for most parties. Advertisers get a new way to reach aggregated and highly defined consumers. Most publishers haven’t got much to lose, as generally they have more inventory than they can sell, hence the reason many are almost giving it away. The opportunity to get a greater return will be compelling.

And I am sure the ISPs could do with the cash as there is little margin left in the commoditised subscription business. We already have an ad-funded mobile phone service, who knows an ad-funded ISP might not be that far off?The level of accountability in digital means there’s nowhere to hide. If this proves a more cost-effective way to reach and influence consumers it will go a long way. Given the current climate, it may not be long before one of the big boys gets their cheque book out again…

Jason Carter is managing partner of digital at Universal McCann

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