Monday, April 24, 2006

Convergence and Behavioral Advertising

Back in the early days (1995) of the Internet (and my consulting practice as well) there was a lot of press devoted to the convergence of TV, the Web, and mobile communication. Today, the vision of U-commerce is slowly becoming a reality as the always connected consumer who is able to transact on multiple devices is emerging before our eyes. With travel being a top e-commerce category as well as a major online advertiser, our industry is in the midst of this permanent change in consumer behavior. As consumers are empowered to control content and the method for transactions, more personalized advertising is needed. Will behavioral advertising emerge as a mainstream vehicle to reach the new empowered consumer? There are mixed views on this subject. Some feel that former spyware companies such as Claria haven't really changed their ways and continue to load unwanted software on your computer. Obviously the VC community does not share this belief as Claria has recently received $40 Million in new financing. To better understand this subject, one has to look at what is happening in mainstream advertising. The advent of Tivo and other DVRs have a significant segment of the population skipping over traditional media advertising. TV shows are being released on the Web for nominal fees on i-Tunes without advertising or will soon be released for free by Disney, but with a technology that prevents the consumer from skipping over commercials. On Tivo you can selectively view ads that are suggested based on your viewing habits. Similar to the pitch by contextual Web advertising companies such as Claria or WhenU, Tivo clearly states in its privacy policy that it does not share specific consumer tracking behavior, but instead looks at aggregate behavior to understand overall trends and specific sub-markets. It is from this aggregate behavior, ads are targeted based on groups of consumers who have similar viewing habits. On the Web, intelligent agents capture surfing behavior and then position ads to match the subject you are investigating. Barry Diller's IAC recently announced a tool called Pronto which provides competitive offers to the consumer based on the products they are researching, another example of this trend. Overall I believe we are at the beginning of a new type of relationship between buyer and seller where advertising plays a more targeted role to purchase decisions allowing the consumer to learn about products and buy those products from a variety of devices.