FEDERAL TRADE COMMISSION TARGETS TARGET ADVERTISING

For over twenty years the junk mail industry has had an on and off love affair with predictive modeling, which is a sophisticated way of targeting a customer by using technology to predict his or her habits. As a former list/data broker and database consultant, I have been in favor of this in aggregate geography, but never on an individual household basis. Anything to conserve paper and help protect the environment.

To explain aggregate geography; that means a cluster of households, from 300 to 500, where demographics and lifestyles are very similar. Enough so that a junk mailer can profitably send the same offer—say for young, upscale households that drink good wine—to the entire group. My objection to targeting individuals is that this uses the Big Brother approach which employs revealing everything there is to know about the consumer which is available to all concerned in the modeling process. A blatant invasion of the person’s privacy.

Now the Federal Trade Commission has decided to “aggressively” enforce Section 5 of the FTC act—which prohibits unfair or deceptive practices—by “encouraging” business to self-regulate itself in the area of behavioral marketing. That’s the latest buzz word for targeting and predictive modeling. By combining demographics and lifestyles using advanced technology, you come up with the actual behavior of an individual; like what books they read, what prescriptions they take, and whether or not they drink or gamble.

In a recent article from 26econ.com, a new term, to me at least, “deep packed inspection,” means the Internet service provider can “view every bit of data sent to and from a particular user.” Two links from that site, here and here, are pieces by Saul Hansell of The New York Times. He thinks the technology will become “the mother of all privacy battles.” Two guys with two companies are behind the concept: Robert Dykes, CEO of NebuAd, and Kent Ertugrul, CEO at Phorm. The pair thinks privacy advocates will eventually embrace what they are doing, because they claim their programs give Internet users complete anonymity.

Perhaps, but with this software in place, there is the ability to add private information to the mix later, and somehow data collectors just can’t resist the urge. With an established broad group of categories, these systems build a profile on your surfing habits—they say without even your name or address—documenting everything you do. Apparently our ISPs are enabling all of this data collection because they receive a big cut of the advertising. Once again, the person supplying all the information is left out of the action.

And that brings us back to the FTC new proposed guidelines for behavioral targeting of online advertising. Like most other government agencies, the decision makers at the Federal Trade Commission haven’t an inkling of what predictive modeling/behavioral marketing is all about, so most new rulings will probably be in favor of business, not the consumer. Particularly while Bush is still in office. More on this next week.