Tacoda Founder Predicts Huge Growth For Behavioral

Dave Morgan of TacodaSAN FRANCISCO -- Behavioral marketing could grow from around $700 million in 2007 to roughly $10 billion in the next five years, according to Dave Morgan, the founder and former CEO of Tacoda, speaking at the OMMA Behavioral conference on Monday.

This represents an annualized growth rate of about 85% per year over five years. By comparison, Internet advertising revenue is expected to double in the same time, from $25.5 in 2007 billion to $51.1 billion in 2012, according to a separate forecast from IDC. Morgan's "blue sky" prediction was significantly higher than figures from research firms like eMarketer, for example, which predicts $4.4 billion in behavioral revenues by 2012.

However, Morgan emphasized that his forecast depended on a number of conditions being met. For one thing, Morgan said advertisers and media planners will bring behavioral targeting for TV ads, taking advantage of the IPTV expansion. "I think we'll have IP-enabled advertising on television, certainly within five years, and probably within three," Morgan said, noting the increasing prevalence of digital set-top boxes, including those made by Scientific Atlanta (now the Cisco Service Provider Video Technology Group) and others deployed by Comcast.

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Furthermore, DVRs have IP connections, and televisions are being manufactured with IP chips already installed. According to a separate forecast from eMarketer, there will be 12.7 million IPTV subscribers in the U.S. by 2012--an almost 300% increase over 3.3 million in 2008. Between all these factors, Morgan said he believed more than half of U.S. homes would have some kind of IPTV within five years.

There are obstacles to the TV play, Morgan conceded in response to an audience question. Cable companies guard their subscriber data closely, so behavioral marketers will have to present them with an appealing value proposition. Sketching out one likely approach, Morgan said behavioral marketers can begin proving the discipline's worth by analyzing DVR data on consumer ad-skipping for ads placed using the traditional "linear" method. By helping advertisers understand why particular audiences skip particular ads using behavioral data, behavioral marketers can sell cable companies on the discipline's full capabilities, including addressable TV advertising.

However, "the real 'elephant in the room' is public policy," Morgan said, reminding the audience that powerful voices on Capitol Hill are calling for more regulation of interactive advertising--especially behavioral marketing--as many of their constituents consider behavioral marketing an invasion of privacy, associating the tracking of Web usage with spyware.

To avoid being regulated out of existence, behavioral marketers must do a better job explaining the discipline's benefits for consumers, like more relevant ads, as well as measures taken to protect consumer privacy. Ultimately, it doesn't matter how effective behavioral marketing is for advertisers, Morgan warned: "If we don't have a value proposition for the consumers, we're going to have all sorts of issues" with regulators.

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