• by Kate Kaye , October 7, 2005

In his work for clients such as AT&T, Holiday Inn, Schering-Plough, Levi Strauss and Sun Microsystems, Target Marketing's Jim Sterne often recommends behavioral targeting. In fact, the Internet marketing strategy consultant believes that true behavioral targeting goes well beyond advertising. Behavioral Insider spoke with Sterne, who's never short on opinions.

BI: What is behavioral targeting to you--how do you define it?

Sterne: I always get frustrated talking about behavioral targeting, because at the beginning of the conversation I have to stop and say, 'Excuse me, what are we talking about?' Are we talking about banner ads? Are we talking about dynamic content? Are we talking about a special discount offer once I put something in my shopping cart? Are we talking about an e-mail that's sent to me after the fact? There's such a variety of different tools and techniques, all of which have great value.

BI: Why do you recommend behavioral targeting? What do you see in it that's beneficial for your clients?

Sterne: The classic problem that anybody in advertising and marketing faces is putting the right message in front of the right person at the right time....So we have the tools now to play with the permutations.

BI: Is behavioral targeting something that your clients grasp readily?

Sterne: Some do and some don't. There are the people at the leading edge who are experimenting. There are the people in the middle who are doing it because they've heard it's a good idea, but they don't quite understand it...And there's a whole bunch of people down at the other end, who don't get it or are simply late followers who want to wait until somebody else takes the arrows in the back before they try it.

BI: Are clients also leery of it because of the higher cost?

Sterne: Everybody's leery of it because of the higher cost.... This stuff has been around for a long time. But the reason that it didn't catch on was, it was priced very high because it was difficult to do, and people who tried it said, 'Boy, this is really cool stuff, but if I take the same money and show a whole bunch of banners to random individuals. I'll end up making more sales.'

BI: Why aren't people saying the same thing now?

Sterne: Well...there are certainly a lot more publishers who are selling ad space, so there's more opportunity to place an ad, and hopefully also the price is coming down. It all boils down to the fact that the people who are selling this stuff understand that they have to price it not just competitively but functionally.

BI: But then there's that flip side that says publisher space is in such high demand now that their prices are bound to go up, not down.

Sterne: And that we just can't keep up all the content necessary to satisfy all the advertising...which means behavioral targeting should be part of the solution.

BI: Are there advertisers that are better suited for behavioral targeting?

Sterne: Philosophically, yes. The companies that are more likely to jump into experimentation and are more agile and able to take action based on the results of their experiments, they're the winners.

BI: So, one of the factors is if you already have a really robust database, and the back-end technologies that allow you to optimize readily?

Sterne: Yes. The more risk tolerance you have, and the more willing you are to experiment, the more likely you are to succeed using this, by the nature of your company.

BI: Are there particular verticals that you think fall into that category, or is it just company by company?

Sterne: All I see is company by company--the companies that either have a large enough Web presence to be able to have the luxury of budget, or those companies that are Web-only. This is the stuff Amazon's been doing since day one.

BI: It seems that people who are sort of novices when it comes to this type of technology often raise Amazon as an example of behavioral targeting. But there are unique differences. And this brings up the privacy issue. Why is it that people are more skeptical or concerned about technologies like behavioral targeting when they're not as bothered by Amazon saying, 'Hey, we know you ordered this, would you like this, too?'

Sterne: A couple of reasons. Amazon has been very careful about doing heavy-duty opt-in. And they've trained us; we've come to expect it from Amazon. Amazon is a trusted brand. If Joe's Pens and Pencils started doing targeting, [we'd ask,] 'What are they [really] doing?'... But if it's a trusted brand, if Federal Express shows me an ad that happens to show up in the right place at the right time, I think, 'Oh, good! I need that!'

Consumers, first of all, they fear what the media tells them to fear. So, right now, everybody's up in arms over spyware...But because of that fear they're running around deleting cookies, which is not necessary.

BI: Does any of that play into discussions you have with your clients about behavioral targeting?

Sterne: Certainly. Behavioral targeting doesn't know who I am. It doesn't know where I live. It just knows that given three choices, I clicked on that one; therefore, I am statistically more likely to take advantage of this offer rather than that offer. This is not a privacy issue.

BI: Do you think that behavioral targeting has a good future ahead of it? I mean, the reality is, it seems to me, that it's something that should be used with other forms of targeting and should become an integrated thing--or will. Do you think that's true?

Sterne: Entirely. Yes. It's a wonderful tool. Can it be used for evil? Well, yes--my stapler can be used for evil. Should I fear staplers? Absolutely not. So, is it a good tool to add to my collection of tools? Certainly.