Communications - August 2012

Society | DOI: 10.1145/2240236.2240243
Samuel Greengard

Advertising Gets Personal

Online behavioral advertising and sophisticated data aggregation have changed the face of advertising and put privacy in the crosshairs.

Collusion, a Firefox add-on, lets a person see all the third-party entities tracking his or her movements across the Web.

NOt lOnG aGO, a man walked into the local Target store in Minneapolis and demanded to speak to the manager. He wanted to know why his then-high school daughter was receiving coupons and promotions for maternity clothing, cribs, and other items that would indicate she was pregnant. “Are you trying to encourage her to get pregnant?” he asked. The store manager examined the stack of coupons and promptly apologized. He said he did not have any idea why the girl had received the coupons. The man then left for home.

This could have been the end of the story. But after talking to his daughter the man discovered she was pregnant. Target had used sophisticated predictive analytics to determine that her previous buying patterns and behavior had indicated a high probability of expecting a baby. In fact, Target and other stores have become so good at gauging customers’ buying patterns they now disguise customer-specific promotions by including coupons that are completely irrelevant to the recipient.

Welcome to the new world of adver-
tising. As statisticians, software devel-
opers, and advertising experts mine
and mix growing volumes of online
and offline data and develop increas-
ingly complex algorithms, they are
building new and remarkably sophis-
ticated advertising models designed
to maximize results—and revenues.
“Technology is enabling new—and in
some cases hyper-local and person-
alized—forms of advertising,” states
John Nicholson, counsel for the law
firm Pillsbury Winthrop Shaw Pitt-
man. However, “there’s a fine line be-
tween what’s acceptable and what con-
stitutes an invasion of privacy.”
“Online behavioral advertising
methods are advancing at an incredi-
bly fast pace,” says Lorrie Faith Cranor,
an associate professor of computer sci-
ence, engineering, and public policy
at Carnegie Mellon University. “There
are clearly advantages to receiving rel-
evant ads, but the Internet, combined
with today’s data-collection technol-
ogy, poses serious privacy concerns.
Unfortunately, most consumers feel
as though they have little control over
what happens to their data and how it
is used by advertisers.”

By the numbers

Over the years, advertisers have struggled to better understand the whims of the marketplace and target consumers more effectively. Identifying market niches and customer segments has been a daunting task and there has been no easy way to deliver relevant ads. The result? Most ads target broad demographic segments through television, radio, newspapers, magazines, kiosks, billboards, shopping carts, and other media. In many cases, advertisers simply hope for positive results and learn by trial and error.

However, the last few years have brought about a revolution in data mining particularly as online and conventional methods have allowed advertisers to assemble and reassemble data in new ways. A growing number of retailers, including Target, assign each customer a unique ID number or guest code. It is associated with a credit or debit card, and an individual’s purchase history is stored for analysis. This is separate from a loyalty program, and the only way to avoid tracking is to pay with cash and avoid giving a phone number or any other personal data. But the process does not stop there. Increasingly, retailers and others plug in information from third-party sources that track the same individual. This might include the person’s Web browsing patterns, credit history, what magazines they read, and even conversations they have had at social media sites.