• by Ross Fadner , May 10, 2004

As we all know by now, the online advertising industry officially began its comeback in 2003. But as research analysts and the business news media were quick to point out, the industry owes its resurgence primarily to the emergence of paid search, the first online ad medium to finally deliver on the promise of relevantly targeted ads and one-to-one marketing.

Cynics would say that without search, online advertising would have very little to look forward to in 2004, and that once the industry recovers, it will fall back into the habit of wasteful spending and mediocre returns. However, those who look upon the online ad industry from a distance will be unaware that 2003 was actually a landmark year for advertising technology innovation.

However, it is the advances in behavioral targeting and contextual marketing that mark the future of the Internet as an advertising medium. In 2003, many contextual marketing and behavioral targeting firms refined their processes and came to market with new products that will shape the way advertising will be bought and sold henceforth. Whether buying by vertical, keyword, audience, or individual Web surfing behavior, contextual marketing and behavioral targeting deliver these options to marketers, offering varying degrees of advertiser control.

The next step for publishers is to apply these tools through partnerships with contextual marketing and behavioral targeting firms. The tools must be there, and if they're not, then advertisers must demand them from publishers. Ultimately, advertisers will cultivate the medium.

CONTEXTUAL MARKETING

Contextual marketing maps advertising messages to content by individual Web page. Audience metrics are ignored, but vertical categories take on enormous significance; the idea is that an advertiser who knows his or her audience can buy the appropriate vertical segment through a category or keyword buy across a network of publishers. Google and Overture's networks represent scale and reach, while smaller players like Kanoodle and IndustryBrains target specific industries.

The contextual marketing purchasing model is very similar to search because the medium's founding fathers, Google and Overture Services, are search engine companies. However, context is very different in terms of application. Marketers should note that while search is a great medium for retail and other direct sales-oriented verticals, contextual marketing also provides a unique opportunity for branding as well as direct sales for certain verticals.

Contextual marketing campaign performance is directly related to context - location is absolutely everything. The irony is that one of the main gripes among advertisers and agencies is that most contextual marketing firms don't allow advertisers enough control over where their messages appear. In most instances, advertisers are presented with a blind-bidding model by category or keyword.

If contextual marketing is a convex model bringing reach to category and keyword buys, then behavioral targeting is its polar opposite, bringing messages targeted to vertical consumer segments to individual consumers. Yet these marketing techniques are complementary, says Jeff Wood, VP sales and marketing at Accipiter Inc. "One is an extension of the other," says Wood. As a marketer, he says, "you want as many variables as you can for predicting purchasing behavior." Behavioral targeting, says Accipiter CEO Brian Handly, is the most accurate tool for predicting users' future actions. "For any industry where a decision is made in a window of time, it's very relevant to find and target a user that has the behavior you want to capture," he says. "It enables you to find them before they've made their purchase."

BEHAVIORAL MARKETING

Behavioral targeting is the ultimate one-to-one marketing tool through content; it expands the one-to-one model beyond search. The technology maps messages to users' Web-surfing behavior.

Even within this category of targeting, firms that specialize in audience segmentation are developing tools that make segmentation even more granular. Accipiter, for example, through its VIBE technology, recently started dividing user behavior into two subcategories, recency and frequency, a move that has performed particularly across certain verticals for its publishing partners' advertising customers.

Take the automotive category, for example. Buying a car can take on average about a month. Auto advertisers looking to place ads and promotional messages in front of these consumers will want to segment them by recency, which constitutes a user's behavior in the last month, as opposed to frequency. Further innovation in granular technologies such as these will enable advertisers to become more and more relevant to online consumers.

For the advertiser who needs to know exactly who fits their message profile, behavioral targeting is an incredibly cost-efficient media buy. However, according to Accipiter's Handly, "education is the biggest deterrent to advertisers' adopting behavioral targeting" - especially among large, national advertisers, says Handly, who notes that behavioral targeting is also effective for branding initiatives.

ADWARE

A software tool that bridges the contextual and behavioral spectrum is adware, the controversial, but effective platform that is also often confused with spyware.

Because adware is essentially software that tracks everything individuals do online, adware can serve both contextual and beviorally relevant messages to users wherever they are on the 'Net. This capability is unique, and extends itself across all sites, as well as all online actvities because the software resides in users' hard drives.

Both adware and spyware came under scrutiny recently at the Federal Trade Commission's anti-spyware summit, where government lawmakers, industry publishers and Internet service provider representatives, information technology security professionals, and a host of industry policymakers from accreditation firms and trade associations convened to discuss the future of software-based marketing, of which adware and spyware are components.

Spyware is the bad stuff. It's software installed on users' computers, usually unbeknownst to them. Proponents of adware would like to see adware differentiate itself from spyware and spam through the creation of industry standards and best practices, as well as government legislation.

For advertisers, adware simply refers to placing advertisements in software. For consumers, adware is software that tracks their behavior online, which is different from personal data. Adware tracks consumer behavior to serve pop-up ads and other promotional messages in exchange for offering users free software downloads.

Often, adware is a great media buy for advertisers in terms of driving conversions, but some feel brand integrity could be compromised by advertising through a medium that essentially serves users pop-ups. Before adware can establish itself as a legitimate marketing medium for online publishers, it may need to win over lawmakers and consumer advocates.