Close ☰
Menu ☰

Is that a hole you are digging? Or is it your grave?

Posted on: Friday 28th of June 2013

A really interesting article by Internet Advertising Bureau President Randall Rothenburg has just gone up on its web site. I recommend you read it, not so much for its content but for its tone.

Just a few years ago the IAB’s tone was triumphant. It had discovered the secret of how to deliver perfect relevance and therefore solve the problems of advertising effectiveness forever. It had seen the future, and the future was it. Hurrah!

Now, if you read this blog, the shift in tone is remarkable. Using phrases like ‘kangaroo cookie court’ to describe Mozilla’s move on internet privacy and the new Cookie Clearinghouse it gives the sense of a frightened cornered rat.

A business model under pressure

It’s worth unpicking these dynamics. This tiny vignette pretty much sums up the dilemma facing all personal-data driven Web 2.0 business models.

The IAB thought it had discovered the holy grail because of a simple train of logic which goes like this. The web sites people visit on the Internet tells you what they are interested in. If you can follow them around the Internet you can create a picture of these interests and serve up ads that are ‘perfectly relevant’. If any particular ad doesn’t achieve 100% relevance, the remedy is simple. Gather a bit more data.

This line of reasoning is actually full of holes but for now, let’s focus on that last sentence. The answer is always ‘gather a bit more data’.

It seems innocent enough and it works, to a point. If you can gather a bit more data you can usually squeeze the response rate a little higher. Meanwhile, however, you’re getting addicted. You’ve always got to have more. You’re now hooked on a God Quest – a quest for omniscience; for perfect knowledge about customers for the sake of perfect targeting.

But – darn it! – instead of being hailed as the saviour of advertising effectiveness and consumer convenience you find yourself hounded for your ‘creepiness’, intrusion and stalking. And annoying people like the EU and Mozilla start putting regulatory, technological and policy spanners into the works.

The irrelevance of ‘relevance’

There are two core reasons for the public’s dislike of modern internet advertising. The first reason is extraordinarily simple. People don’t like being stalked. Never mind the economics of it. They just don’t. End of story. You have to be emotionally unintelligent not to understand this.

The second reason is that (sorry to say it) the holy grail of ‘relevance’ in advertising is actually a wild goose chase. In fact, ‘relevance’ is irrelevant to the future of advertising and the quest for advertising effectiveness. That’s because it’s a proxy for something else: utility. Consumers actively consume advertising when it is useful; when it helps them make a better purchasing decision. ‘Relevance’ is just a proxy for utility. But they’re not the same, and unfortunately the proxy and the real thing currently work in opposite ways.

‘Relevance’ in internet advertising is manufactured by unseen third parties gathering data about people largely without their knowledge, understanding or control to create profiles about them which are used to drive ‘targeting’. It’s all done to and at the individual by an invisible external force. Whether you can ‘opt in’ or ‘opt out’ of this process is irrelevant, because there is hardly any utility in it.

Utility is about empowerment. It happens when you put useful tools in the hands of the user, so that they can use them to achieve their own goals. It works by helping them express themselves, including specifying what they want to achieve.

Process-wise, relationship-wise and value-wise the two are like chalk and cheese. Utility adds value for both advertiser and consumer. In its current form, the quest for ‘relevance’ destroys it, the only real beneficiary being the stalker/data gatherer.

The devil and the deep blue sea

The dilemma especially for the adtech companies in the IAB is that migrating to the alternative value-creating model of user control/advertising as decision-support involves halting their current trajectory and accepting some revenue losses as alternative approaches are built to scale. Advertisers and publishers themselves may prefer a different model, but until the infrastructure is in place there’s little they can do.

Cold turkey or just turkeys voting for Christmas? To industry insiders facing a revenue loss both options look pretty much the same. So they just keep on digging the same old hole. Soon this hole will be so deep they risk never getting out.

How change happens

If Web 2.0 companies were all-powerful as well as omniscient they might be able to halt evolution. But they can’t. By resisting change they just push change-making elsewhere, handing the initiative over to other parties.

We now see two fascinating outcomes unfolding.

  • First, when an industry cannot or will not change itself, others have to do the job for it. Online advertising is now being circled by a fast growing band of predatory innovators including Mozilla who see a huge opportunity to disrupt existing models, build new brands and make new fortunes in the process.
  • Second, the big brands Ctrl-Shift is talking to are increasingly concerned about reputational risk – the fear that if they don’t create clear blue water between themselves and increasingly discredited Web 2.0 ‘data addict’ business models their brands will get tarred by the same brush. Watch out for some interesting developments on this front.

Add mounting regulator determination to act and you’ve got the recipe for personal data’s perfect storm. More of which later.