Esther Dyson, who knows a thing or two about media and technology (as well as being the board member of 23 and Me who helped me with my genetic sample in Davos last month) wrote an op-ed piece in the Journal yesterday on the internet-based future of advertising.

It caught my attention because of who wrote it and because it was pegged to the Microsoft bid for Yahoo, as was my column on the same topic last week. I found it especially engaging because she agreed with me on one point but then branched out into something else entirely.

Like me, she is sceptical about behavioural targeting - when an ad agency puts a cookie on a computer to track your browsing habits and then serves advertisements based on your presumed interests, no matter what site you look at.

This fits with my column, which suggested that ad networks (including those using behavioural tracking) will have more difficulty displacing the traditional interplay of media buyers and sales forces than some digital evangelists predict.

But she goes on to argue that advertising, instead of being mediated in roughly the same way as today, will instead switch towards personalisation. She suggests that internet users will volunteer information about themselves and their willingness to buy products by "friending" companies. In return, they will receive special offers and discounts.

Thus, advertising will move from mass to direct marketing. Instead of relying on display ads targeted by publication or demographic group, companies will send out millions of individual messages. The industry will adopt techniques similar to search advertising, where users signal an interest in products by typing search terms and companies then bid to place relevant ads in front of them.

There is clearly appeal to Esther’s idea if it worked. Advertisers would be able to avoid the Wanamaker problem that half the people viewing any ad are not interested anyway. Meanwhile, consumers would receive only offers that directly benefitted them.

It also draws praise from Felix Salmon for switching the premium from the publication to the individual. An advertiser would pay extra to reach me because I would have signalled that I was a soft target rather than paying a premium to the publication I read on the off-chance of capturing me.

But there are some big obstacles in the way.

One, which Esther mentions, is that Facebook recently tried to launch a prototype of this kind of thing in its Beacon scheme and it was a fiasco. She refers to it as a PR problem but it was in fact a substantive problem - people did not want their personal consumption patterns to be shared with either friends or advertisers.

Even if that can be overcome, it is not clear to me why it should work any better than direct mail shots do now. I am clearly more valuable to an advertiser if I have signalled my interest in his product but I am not especially more valuable than anyone else who "friends" him in hope of a discount.

So why should that get me anything more than the discount I get now by joining a loyalty scheme, getting a Tesco Clubcard, or subscribing to a magazine? As previously noted, lots of magazines already send me letters saying I am a highly valued subscriber but they do not mean it and they do not offer me any better a deal than those available to millions of others.

Finally, I fail to see how this displaces the world of display advertising, as Felix suggests. All it may do is take online something that already exists - direct marketing and subscriber discounts. This is not a brave new world; it is the one we know all too well already.

February 12th, 2008 in Advertising | Permalink