Search for Tomorrow

Fresh Ads for Good Behavior

Because of the inherent flaws in contextual marketing online, the stakes are even higher for the online advertising industry's next big play: behavioral marketing. This technique promises to serve up ads based on a Web surfer's habits and mind-set. "You're targeting the person, not the content," says Forrester analyst Charlene Li. It's far more ambitious -- and more advertiser-friendly -- than contextual marketing. "You could never target intent before, in any medium," says Li, capturing what's exciting about the new method. "You just put your message out there around content that seemed likely to attract the right people and hoped it worked."

To deliver on that opportunity is a daunting technological task. It requires analyzing the surfing habits of millions of users in order to define segments based on what users are reading, how often they read it, and what products they search for. One of the first entrants in the market is Kanoodle, a small New York-based search-marketing firm. It has joined with online advertising network 24/7 Real Media to launch BehaviorTarget, a behavioral search service. "We've created a taxonomy of 486 topics that we'll roll out slowly as we reach critical mass with each audience segment," explains David Hill, president of media solutions at 24/7 Real Media. "If you visit sports sites several times a month and fashion sites several times a month, you might fall within our 'active women' behavioral segment." Unless you're a guy who likes sports and fashion, or works in one of those industries.

Though a potential gold mine for advertisers, data collection on this scale -- and at this level of detail -- is, for many consumers, a little scary. It raises a host of privacy issues as well as questions about who retains the rights to or ownership of particular kinds of information. Lance Podell, president of Kanoodle, is quick to defend his company's concern for privacy. "I'm tracking a cookie, not you, and you will be able to opt out at any time. That cookie doesn't know your address or your Social Security number, it just knows your behavior. IP addresses aren't being collected," he says.

Lycos is one of the first companies to sign up for BehaviorTarget. Says Steve Gross, Lycos's vice president of marketing, "We need different and creative ways of making money off of our user base. We have a unique user base in the tens of millions, but our ability to understand that base was limited." Consider a group of users who have been defined as car enthusiasts because they visit automotive sites such as Edmunds.com and NASCAR.com. Gross is eager to sell ads aimed at that group and deliver marketing messages to them even when they're visiting a technology blog. "Television advertisers would love to understand composition this well, to identify audiences and what they want, beyond just age and sex, which is how they sell ads now," says Hill.

So although it may seem simplistic to get lumped into a bucket because of a few Web-surfing habits, it is better information, as Gross notes, than most advertisers have to work with. Yet even its boosters acknowledge that behavioral marketing is a work in progress. "There are things we're still working out," admits Hill. "For example, somebody goes to a series of auto sites, but how many times must they visit before they become part of that segment? Our plan is to use our software to watch their behavior over the course of time, then do branding studies to hopefully get the mix and the formula right." If that works, and if the privacy guardians don't howl too loudly, this may be the method with the best chance of taking off.

Think Local, Act Local

If the search engines have learned anything from their original keyword-advertising system, it's that when people type a product name into the search window, they want to buy that product now. Chances are, though, that users see ads from online retailers who can ship it within the week, not the minute. How can you feed immediate needs, such as where's the closest party-goods supply store that's open late? Hit 'em where they live.

In March 2004, Google launched a beta site called Local.google.com that lets users search by zip code or local address. Thirty percent of all advertising is purchased in local markets, and the Yellow Pages ad market is estimated at $14 billion per year -- a stash that Google would love to break into. So far, the company has focused on importing Yellow Pages data into its local engine and getting the location algorithms right, without serving up additional ads alongside search results. The big question will be whether the advertisers arrive when local goes live.

Seth Berkowitz, vice president of business development at the car-buying information site Edmunds.com, says no thanks. In theory, he's a likely customer, since he sells customer leads to local auto dealers. But he's focusing on buying location-specific keywords through traditional search-marketing products. "I love it when people type in 'Los Angeles Honda Dealers' because 20% of those people execute on those ads," he says.