Big Telco Is Watching You

Better targeting and tracking has helped Internet advertising grow into a $23.4 billion business in the U.S. alone. However, a new study offers sobering evidence of consumer attitudes toward targeted advertising: A joint study conducted by the University of California at Berkeley and the University of Pennsylvania found that two out of every three U.S. consumers resented being tracked; and the more they learned about the different ways in which they were tracked, the more likely they were to object.

That's also a worrying sign for service providers, who anticipate new revenues from targeted advertising. In a recent Heavy Reading survey of more than 100 service providers, nearly 90 percent agreed with the statement: "Generating incremental revenue from advertising will be a critical requirement for service providers within the next five years."

Further, 100 percent of the service providers surveyed anticipated that advertising would account for part of their annual revenue in five years, and 10 percent felt it would contribute more than 15 percent of revenue by then. Targeted advertising ranked as the most valuable capability for each of the three screens.

Given that net-neutrality debates are already raging around the world, how can service providers leverage their assets to get some of the $450 billion global advertising revenue?

  1. Think big (or at least broader): Consumers are most resentful when their individual behavior is being tracked and targeted. While advertisers prefer such targeting, they would also appreciate the ability to target by neighborhood and some degree of interactivity via a back channel. U.S. cable operators have been offering ZIP+4 targeting for years, and have been able to command significant premiums for such targeting.

  2. Ask: Opt-in and opt-out targeting – allowing consumers to choose whether they want to be a part of the advertising approach – is a lot safer. An oft-ignored element of this approach is allowing for consumers to opt out at any point in a simple, easy manner. Knowing they can get out whenever they want will lower barriers to entry.

  3. Tell: Service providers haven't always been upfront with initial tracking or targeting trials. In various NebuAd Inc. trials, for example, most providers simply informed consumers that there were changes to their privacy policies, and added a paragraph on the trial somewhere within that policy. Much of the resentment for this kind of action comes from a sense of being confused and potentially exploited. Clearly explained terms and conditions will obviously help.

  4. Bribe: If consumers sense that providers are benefiting in some way, they want to get something, too. (Or they just want to get something, regardless). Mobile advertising company Blyk has signed up more than 200,000 U.K. subscribers by offering free minutes and texts in exchange for personal information and an agreement to receive a certain number of promotional messages.

  5. Protect: One of the greatest concerns consumers have is the protection of their data. Service providers may benefit from guarantees that the data will not be released, on purpose or by accident, with clear penalties or compensation if that happens. The industry would hardly want to take on this kind of responsibility, but it may be thrust on them (and others) anyway. When asked how companies that use personal information illegally should be dealt with, 18 percent of consumers felt the company should be put out of business, and 35 percent felt the executives involved should face jail time.

Obviously, targeted advertising offers service providers an attractive opportunity. However, these findings further underscore that they need to proceed cautiously, and consider the effects on their long-term rather than immediate revenue.

— Aditya Kishore, Senior Analyst, Heavy Reading

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