Review: The Mad Men are watching you

January 23, 2015

By Martin Langfield

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

A lot happens in a split second online, much of it good for the advertising business but worrying for privacy advocates. Lightning-quick auctions to push tailored ads to individual web users are growing fast, writes Mike Smith, a digital publishing executive, in his new book “Targeted.” Smith predicts such auctions will be a big part of the industry’s future. Ad men will need ever more personal data to fuel them.

Smith, who oversees digital ad platforms at Hearst Magazines Digital Media, provides an eye-opening explanation of “behavioral targeting” – the technique ad firms use to track, analyze and exploit the detailed information people leave about themselves online, wittingly or not.

Cookies, little strings of code placed on a computer when a user visits a website, play a big part in the “digital exhaust” which people emit online, Smith writes, as does all the information offered on social media or when registering on websites. Traditional cookies can be blocked or erased, but there are forms of cookie-less tracking. “Fingerprinting” records specifics of a user’s device. It’s hard for most people to avoid sending information to advertisers, publishers and the bewildering array of specialist firms that serve them.

Such information can be exploited in real-time computerized auctions for the right to show online ads to individuals, Smith writes. The algorithm-driven auction process takes place on electronic marketplaces in the hundredths of a second after an internet user clicks a link to visit a website. The winner’s ad appears by the time the site has fully loaded. Millions of individual auctions can take place every second.

Advertisers see something like their holy grail: the right ad served to the right person at the right time – for the right price. The real-time bidding process allows ad campaigns to be fine-tuned through instant feedback. In a technique called retargeting, desirable consumers can be followed around the internet, for example by placing ads on other sites they are known to frequent.

The results are disconcerting for people who are used to traditional print or broadcast media, where everyone sees the same advertisement on the same page at the same time. On the internet, the same website can show one consumer an ad for sailing attire, another an ad for diapers and a third one for grouting supplies – at exactly the same instant. What is seen depends on the profile assembled from data about a person’s lifestyle, browsing history and shopping habits.

The rise of real-time bidding in the United States has been rapid. Five years ago, Smith writes, only 1 percent of online display ads – such as the banners across the top of many websites – were bought on a real-time bidding basis. The proportion is now around 22 percent, and by 2018 is forecast to reach almost 30 percent.

Smith predicts that as internet-connected TVs take hold, the kind of highly focused ads now booming on the web will be possible there too. Tracking people better via mobile devices, and the rise of the “internet of things” as fridges and other appliances get IP addresses, will bring even more data into people’s digital exhaust for the industry to draw on.

Smith sees the multibillion-dollar internet advertising industry that has grown from such data collection as a boon for all web users. Without it, he argues, much that is free online would not exist, or would cost money.

For privacy advocates, though, the future he paints sounds bleak. While the vast databases of the ad business may not record individuals’ names or social security numbers, the industry controls such detailed information that identities may be easily discoverable by those with a mind to it. It sounds like an invitation to abuse.

Smith examines various approaches to protecting privacy or mitigating its erosion. People might demand en masse to be paid for the use of their data, for example, or sue for loss of privacy in the courts. “Do not track” browser options may spread, as may cumbersome “opt-in” requirements for online services. Non-profit institutions could hold personal data and only release it in anonymized form.

He finds most of these impractical, at least in the United States. Privacy concerns are a real issue, he acknowledges, but most people seem too happy enjoying advertiser-subsidized stuff online to worry about what they are giving away.

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