• by Kate Kaye , August 13, 2004

Behavioral marketing has registered high on the online marketing buzz meter of late, but privacy concerns abound. A new third-party ad technology firm, Dotomi, aims to serve as an alternative to spyware, and even e-mail, through its permission-based ad service. The firm launched its Direct Message product in test mode last week. Whether consumers will be comfortable with it remains to be seen.

Dotomi works directly with advertisers and publishers to serve browser-based ads to consumers who have opted-in to receive them. For instance, folks visiting Israel's Ophir Tours Web site have been asked to sign up to get ads for the travel company's ski trips and Tuscany getaways. Publishers agree to replace otherwise scheduled ads with banners and other placements for Dotomi advertiser clients when users who have registered with the service visit those sites. Advertisers including Audio Book Club, Orbitz, and priceline.com have agreed to use the Dotomi. Publishers such as About.com, Advertising.com, Gannett Online, Lycos, and NYTimes.com have signed on to accept Dotomi network ads in exchange for a cut of the ad fee.

"The model is interesting," says Craig Swerdloff, VP, national direct marketing sales at MaxOnline, an online marketing management and services firm that runs an ad network. MaxOnline, a division of Ask Jeeves, will accept Dotomi ads throughout its site network, which includes Cheap Tickets, WomensWallStreet.com, and AskMen.com. The company runs a service similar to Dotomi's, which identifies users on an anonymous basis and serves ads to those users when they visit sites in the MaxOnline Network.

Dotomi does not store or track the behavior of users who have registered with its advertiser clients; rather, advertisers use their own data to customize Dotomi-served ads by name or personal interests. Although other personalized online communication forms such as e-mail have proven to be acceptable by users, Swerdloff--who also runs MaxOnline's e-mail list services operation--comments: "I don't know that [Dotomi Direct Messaging] is going to be successful. I don't know that consumers are going to appreciate the communication forum."

Yoni Waksman, CTO of Ophir Tours, might disagree. He's been using Dotomi's product to approach opt-in users for over a year, and has garnered a click-through rate of as high as 13 percent for some Dotomi campaigns. Around 12,000 people have registered through the Ophir Tours site to receive its ads when visiting publisher sites within the Dotomi network.

"We take disclosure very seriously," asserts John Federman, president and CEO of Dotomi. Every ad served by his firm features a drop-down menu that enables users to opt-out within the ad and provides information on the ad format and advertiser.

Federman does not see his product as a replacement for ad services like Claria that serve pop-ups and pop-unders to users in its network--often to the resentment of publishers not associated with the ads. Instead, he suggests: "Dotomi is more about the retention phase of marketing." In fact, he views it as a replacement for e-mail marketing--suggesting that people often delete opt-in e-mails, and adding that ads served by his firm do not contribute to ad clutter, but make ads more relevant.

"E-mail newsletters are kind of an endangered species," notes Peter Horan, CEO of About.com. Horan, who has chosen to run Dotomi ads as part of the firm's broader one-to-one strategy, cites obstacles such as decreasing open rates, spam filters, and ISP bulk e-mail blocking as part of About.com's transition from e-mail to formats like Dotomi ads and RSS feeds, which serve content to users based on personal preferences.

"Consumers still see a lot of value in the stuff that they opt-in for from a lot of marketers," says Forrester Research Analyst Jim Nail, claiming that the notion that Dotomi ads could replace e-mail "is spin and hype."

Nail considers Dotomi's offering as "kind of a logical step after behavioral targeting," and foresees the possibility that behavioral targeting technology companies could provide similar products in the future. Still, he's skeptical that consumers will be truly comfortable with Dotomi ads if advertisers are not very forthcoming about the Dotomi relationship. "Consumers don't ever read any of the fine print for anything," he observes. "Several days later you get an ad. Does the consumer make the connection? No--absolutely not."