• by Ross Fadner , April 26, 2004

On Monday, the behavioral targeting advertising network was officially born.

While 24/7 Real Media will claim to have discovered this brave new world a few months ago, both aQuantive Inc. and Tacoda Systems launched advertising networks yesterday to compete in the rapidly growing--yet very much under construction--behavioral targeting medium. Now, aQuantive said its new unit DRIVEpm (performance media) will collect audience segment information from its network of publishers, and serve ads based on the behavioral data it collects. And Tacoda continues to develop a pay-for-performance network of content sites that will run text ads leveraging its AudienceMatch technology.

Analysts suggest that it's a bold play to attempt to run a behavioral targeting network, considering how young the medium is. Jupiter Analyst Nate Elliott says: "[aQuantive] must be confident if they're willing to walk into this uncharted area." He says that he has no idea how well behavioral targeting will perform opposite contextual marketing. "We'll have to see how well it works," Elliott says, adding that for now, "we don't know which types of publishers will benefit from behavioral versus contextual marketing. It's definitely an open question."

Elliott notes that the current buzz surrounding behavioral marketing marks a second generation of sorts for the medium. He says the first wave was sparked by DoubleClick and Engage, but their efforts were effectively quashed during the dot-com meltdown. This so-called second generation includes products and services from Tacoda, Revenue Science, 24/7 Real Media, Accipiter--which today announced 53 percent year-over-year first-quarter revenue growth--and now, aQuantive.

AQuantive's positioning in the space is particularly interesting, given that its other properties are advertising technology solutions providers AtlasDMT, NetCreations, and GoToast, as well as AvenueA and i-FRONTIER, two major online media and creative agencies. "This will be the first time AvenueA has worked on the sell side," Elliott notes.

Although Scott Howe, general manager of the new unit, states that each of aQuantive's other properties will remain separate from DRIVEpm, "AvenueA is just one client of ours," he says. Howe believes the new company will serve to decrease the number of inefficiencies generated by today's "traditional" interactive campaigns. "A lot of advertising dollars are wasted--if we can eliminate a fraction of the waste, we can save our clients a lot of money," says Howe.

But will advertisers pay more for targeted audience segments? Howe thinks so. "Publisher space is valuable stuff. Advertisers will pay more for valuable inventory," he says, adding: "Advertisers are willing to pay more because of less waste, publishers are serving quality messages to consumers, and consumers get a better overall surfing experience [because the messages served them are relevant]."

However, as much as DRIVEpm and other behavioral targeting networks believe that more targeted advertising is for the good of the industry, privacy issues--especially with data collection--linger over the industry, perhaps even more today than ever before. There are other problems too, says Charlene Li, principal analyst, Forrester Research. "[Behavioral targeting networks] are selling very private information. The key issue is who owns this information."

Tacoda and Revenue Science both say the information they collect belongs to the respective publishers. But as DRIVEpm's Howe notes, aQuantive owns all the data it collects from its network, and will use this data to develop its audience segments. "We believe that by bringing more data to the table we'll be able to unlock the value [of behavioral targeting]," Howe says.

Forrester's Li notes that the success of behavioral targeting will have a lot to do with the actual ownership of the data. "The problem [with an ad network]," she says, "is [the] possibility of bartering and trading information [between sites]."

Nevertheless, Li says that behavioral targeting is a very promising advertising technology, but the "current number of marketers interested in behavioral targeting is few and far between."