October 17th, 2007
Firm Mines Offline Data To Target Online Ads
By Kevin J. Delany and Emily Steel
Wall Street Journal
Acxiom Corp. knows a lot about you. It has scoured public records for how many cars you own and what your house is worth. It has accumulated surveys that show if you are married and how many children you have.
And for years Acxiom sold that information to marketers eager to use it to send mailings and make telephone pitches to consumers most likely to buy. Now, the Little Rock, Ark., company is putting those hundreds of millions of bits of data in the service of customizing which display ads to show people browsing the Web—a development that has raised red flags with some privacy advocates.
Acxiom’s latest effort, announced yesterday, is one of the most aggressive in a broad push by Internet and online-ad companies to target display ads to specific groups of users.
Yahoo Inc. and Microsoft Corp. are among the Internet companies that engage in so-called behavioral targeting, using information such as users’ Web search habits and the pages they visit to pick which ads to show them when they visit their own or partner Web sites. Time Warner Inc.’s AOL unit recently bought behavioral targeting firm Tacoda Inc. and is planning to include more targeting technology in its online-ad offerings, which includes the network Advertising.com that sells ads on thousands of Web sites.
Behavioral targeting allows a Web publisher, for example, to charge premium rates for a luxury-car ad even on a lightly visited site about needlepoint, if the user’s previous Web activity shows an interest in buying an automobile.
In the U.S. this year, advertisers will spend $575 million on these behaviorally targeted ads, rising to a projected $3.8 billion in 2011, according to research firm eMarketer Inc.
Acxiom—which recently had private-equity buyers break off a proposed $2.25 billion deal for the company—has been building up its online-ad business, including the September acquisition of behavioral-targeting firm EchoTarget Inc.
“The way targeting happens in the online world today isn’t all that sophisticated,” says Chief Marketing and Strategy Officer Rich Howe.
Acxiom’s new service, Relevance-X, goes further, drawing on the company’s database of 133 million households to determine which ads to show. Acxiom’s consumer database includes information gleaned from sources such as public real-estate and motor-vehicle records, surveys and warrantee cards consumers fill out. Estimates of annual income, marital status, average ages of kids, home ownership and property value, educational level and travel histories are also available.
The company classifies each U.S. household into 70 clusters based, it says, “on that household’s specific consumer and demographic characteristics, including shopping, media, lifestyle and attitudinal information.” Clusters range from “Married Sophisticates” to “Penny Pinchers.”
Acxiom contracts with Web sites that collect consumer addresses, such as online retailers and those offering sweepstakes and surveys. In a blink, Acxiom looks up the people who provide their addresses in its database, matches them with their demographic and lifestyle clusters and places “cookies,” or small pieces of tracking data, on their computer hard drives.
When those people visit Acxiom partner Web sites in the future, Acxiom can read cluster codes embedded in the cookies and use them to pick which ads to show. The company doesn’t disclose the sites that carry such targeted ads, but says they reach 60% of U.S. Internet users.
That allows a company selling an expensive antiwrinkle cream, for example, to contract with Acxiom to display its ads to affluent women 40 years or older in the “Skyboxes and Suburbans” or “Summit Estates” clusters.
Some privacy advocates say they are concerned that Acxiom risks going too far with its Internet ad targeting. “You’re potentially seeing a link between very sophisticated offline databases being used to target online advertising,” says Jeff Chester, executive director of the Center for Digital Democracy, a nonprofit consumer-advocacy group focused on digital media. “That’s precisely the objection that privacy advocates had back in 2000.”
Then, the Federal Trade Commission investigated the data-collection practices of DoubleClick Inc., one of the biggest Internet ad companies at the time. The company had announced plans to link consumers’ names and addresses with Web-surfing habits, but the company renounced the plans after criticism. The FTC dropped the investigation.
In response to consumer concerns, online marketers established the Network Advertising Initiative trade group and a set of guidelines for determining what information they would and would not collect about consumers. Marketers decided for the most part not to match offline personal data with Web-surfing information. Acxiom is not a member of the group, but says its service complies with the guidelines.
Now, government examination of online targeting practices is heating up again. The FTC next month is holding a two-day public forum to discuss consumer-protection issues stemming from the practice. Such issues have also been raised following the announcement of Google Inc.’s planned $3.1 billion acquisition of DoubleClick.
“You can’t just move into this space without recognizing where the sensitivities lie,” acknowledges Jennifer Barrett, Acxiom’s global privacy officer. “We’ve made every effort to do that and will continue to monitor that.”
Ms. Barrett says that Acxiom briefed the FTC on its ad targeting plans and the regulators didn’t raise significant objections. The FTC won’t confirm or deny if there was a meeting, but a spokeswoman says the agency doesn’t approve products or services before they go to market and expects companies to follow the law.
Acxiom says the ad targeting remains anonymous, because only offline cluster status, gender and zip code is linked to a consumer online—not the rest of the data held by Acxiom—and each cluster has at least one million household members.
Acxiom also requires the partner sites that collect consumer address information that initiate the cookie placement to disclose that the data may be used by a third-party for marketing purposes. The company’s Mr. Howe acknowledges that most consumers likely don’t know who exactly will be using the data. “The majority of individuals don’t know a lot about it,” he says.
Some firms that marketers pay to collect names of potential customers on the Internet also are starting to work with data-collection companies to combine offline data to better target their ads.
For example, Q Interactive, a Chicago-based lead-generation firm owned by Landmark Communications Inc., operates a number of registration pages on Web sites, including About.com and Weather.com, where visitors can provide personal information. This can include their name, address and telephone number. Q Interactive then takes that information and combines it with data from Brewster, N.Y.-based Alliant Cooperative Data Solutions. Q Interactive now is working to use that information in the future to target the banner ads that people see on Web sites.
Online ad firm ValueClick Inc. says it has experimented with using information gathered by data-collection companies with its email marketing if consumers agree to it, if the practice is disclosed and if the data remains anonymous.
Some of the more prominent digital ad firms that specialize in behavioral targeting shy away from using the reams of data collected about people offline to target online ads. These firms say they already collect enough anonymous information based on people’s online activities and would rather not tackle the privacy issues that come along with gathering offline data.
“Many things in online advertising are very tempting because you now they’d be efficacious, but you know they are a bad idea because they are not consumer-friendly,” says Bill Gossman, president and CEO of Revenue Science, a behavioral-targeting firm.
Some online-ad executives fear that the moves to use offline data in targeting ads could trigger a public backlash that could affect the entire industry.Tacoda founder Dave Morgan says the firm has been approached to work with offline data-management firms dozens of times, but has always said no.
“If you scare the consumer,” he reasons, “you will hurt your business.”