VLG Dialog Marketing

Two great Internet topics surfaced in recent days with regard to behavioral tracking and new business models. Will privacy policies undercut online business models before they ever get to their feet?

Part One: Privacy
The impact of opt-in and opt-out privacy rules need to be revisited. Behavioral content delivery of ads or media content serve up relevant content and supposedly shield consumers from a barrage of “noise” found on the Internet. Privacy policies are generally buried in the footer or within pop-up legal agreements that are seldom read. We tend to find these policies boring and easily dismissed.

So as the groundswell of debate related to Internet privacy reached Capitol Hill, maybe those of us in the online advertising industry should pay special attention. The House of Representatives’ subcommittees on communication and consumer protection held a joint hearing last week to more closely examine advertisers’ rights to track your behavior online and consumers’ rights to guard that information.

Central to the hearing were rules regarding consumers’ current need to opt-out of behavioral tracking by advertisers. Yahoo! and Google are front-and-center, because advertisements on those two platforms rely heavily on behavioral and content tracking to serve up ads. Details of the hearing and the debate were brought to light by Canadian Greg in a shared-news story. Greg suspiciously omitted from his blog profile, perhaps fearing retribution or an invasion of privacy.

This is not a new debate, but one that enjoys renewed fervor among concerned special internet groups on both sides of this debate.

Part Two: Revenue Models
If anything was learned from the bursting of the Internet bubble, it was that revenue is just as hard to generate online as it is offline. The margins might be higher, which is the lure for “.com” solution and service providers today. In 1998 we could rid ourselves of pricey store-fronts in exchange for central distribution points, thereby reducing overhead and allowing consumers to place orders in the comfort of their own underwear. That was then.

Advertising revenue is manna from heaven today. Revenue models for many Web 2.0 companies since 2000 lean heavily on advertising revenue to pay the bills. Behavior tracking provides a service unmatched by newspapers. You can’t one-off a newspaper and serve Bob one ad and Sally another in the same household, or several, or thousands of households. The Internet can do that, but needs a little help from cookies and behavior tracking.

Michael Nielsen, though long-winded, presents a cogent argument as to why good companies run by smart people are failing today. (Disclaimer: Nielsen’s article shifts to scientific publishing about halfway through and he lost me.) You’ll find the part about the online news killing newspapers interesting. Behavioral tracking plays a hand in content delivery and not just ads. Knowing your target audience makes it especially easy to serve up content that might actually get read.

The social and anthropological impact of limited content (a.k.a. filtering content) has an Orwellian feel to it, but newspaper editors have been deciding what makes it into the paper and what doesn’t. The fact that online news filtering is determined not by and editor, but by user behavior poses an interesting question. It’s a question I can’t answer, but one that should be discussed.

Part Three: Opt-in Handcuffs
Whether the debate centers on relevant content delivery, or consumer privacy, it should be clear to advertisers and new media (social or otherwise) that behavior tracking is like air in the web space. If we force a user to opt-in each time we track behavior, consumer fatigue will set in and we’ll have to revert to a failing newspaper business model.

The Gray Lady gasping for air?

Subscriptions become powerful tools in this potentially brave new world, but why wait. Building a community of the willing gives you the ability to measure, track and deliver content that’s relevant. Social media opens the door to opt-in content delivery in a way that becomes difficult to regulate without imposing an unnecessarily layer of FCC regs on advertisers and consumers.

Businesses fail or succeed online with or without such changes, because the industry seems to be in a constant state of evolution. How should business respond to this debate? Be agile and creative.