Checking Your List and Checking it Twice? What the Holiday Season Teaches Us About Behavioral Targeting

For retailers, it’s the most wonderful time of the year—and this year is no exception. Predictions for 2012 holiday spending are giving retailers reason to be optimistic. According to comScore, E-Commerce in particular, is expected to increase by 17% this year. As more consumers turn to the web to avoid long lines, parking shortages and limited inventory, advertisers will be ramping up their digital ad spending to take advantage of the holiday rush. But are these ads really reaching their intended demographic audience?

Third Party Data: Naughty or Nice?

Research surrounding the effectiveness of third party data tells a cautionary tale. Typically, third party data is compiled using tracking cookies or pixels which are placed on one’s internet browser. The cookie tracks the user’s online behavior and makes a judgment as to which demographic category they represent. As compared to traditional predictive analytics that leverage offline demographic data to identify likely prospect audiences, online behavioral targeting fails to deliver the same level of data integrity and accuracy.

For advertisers, the holiday season only exemplifies the challenges of data integrity and reach. Take this example for instance: Joe is a 30 year old male who purchases a baby gift for his niece at Babies ‘R’ Us online. Next, he visits a website that sells women’s clothing and makes a purchase for his mother. Based on his behaviors from one site to the next, data compilers may label Joe as a middle-aged woman with small children. Next thing you know, advertisers are cashing in big bucks to serve Joe ads for strollers and high-heeled boots. The bottom line is that online demographic segments are often misrepresented. And contrary to popular belief, online behaviors are not always accurate indicators of true purchasing intent.

Who’s Climbing Down Your Chimney for Data?

A recent Web Privacy Census conducted by Berkeley Center for Law and Technology reports an 11% increase in third-party tracking on popular websites from May to October 2012*. In fact, third-party tracking is expected to double over the next two years (assuming it survives pending consumer privacy legislation). There is more scrutiny over data collection and usage than ever before, and consumers are coming out of the woodwork to voice their concerns. On the flip side, advertisers are scrambling to educate people about the benefits of data mining as it relates to relevancy and personalization. We’ve recently witnessed the advertising industry’s outlash over Microsoft’s announcement to make “Do Not Track” the default setting on its IE 10 browser. Let’s face it; consumers don’t want to be tracked online. Privacy issues aside, declining clickthrough rates over the past several years remind us that we need a better targeting solution.

Scale: Santa Delivers, but Cookies Don’t.

Let’s not forget about the issue of limited reach. Many users opt out of cookies or delete them on a monthly basis. Additionally, comScore research shows that on average, there are 2.6 cookies per unique user, meaning that advertisers often pay up to three times to reach the same user. It is also estimated that at any given time, only 35% of one’s target audience is available within an active cookie pool. That leaves 65% of an advertiser's ideal prospects unreachable. Wouldn’t it be nice to know exactly who you’re targeting online, what their demographic and psychographic profile looks like, and where they’re located? And wouldn’t it be even better if you could target them across all of their internet-enabled devices—at scale?

A Cookie-Free Solution – Santa may not be happy, but advertisers will be.

IP Zones is a true alternative to cookie-based targeting that uses proprietary offline data to cluster households into demographically similar zones at the neighborhood level. The end result is sub-zip code level targeting that makes nearly 100% of your audience available online. Each cluster is appended with more than 750 distinct variables for each household, giving advertisers an accurate audience profile based on gender, income, life stage, and purchasing intent. All data is compiled strictly from publicly available offline resources. IP Zones essentially links the mailbox to the modem, applying the same analytical techniques that CMOs currently use to define target audiences for other marketing channels. Since IP Zones uses the modem as the key, advertisers are able to target their audience across multiple devices. IP Zones is already outperforming the cookie by an average of 128% across consumer industries.

If the holiday rush teaches us anything this year, it’s that we need a better solution for targeting prospects online. Don’t waste time checking your list and checking it twice. As we move into the New Year, give your CMO and clients the gift of Scale, Data Integrity and Privacy.

*Chris Jay Hoofnagle & Nathan Good, The Web Privacy Census, October 2012, available at https://www.law.berkeley.edu/research/bclt/research/privacy-at-bclt/web-privacy-census/