Saturday, April 19, 2008

Online advertising: consumer perspectives

Berkeley/Santa Clara conference

Panel on Consumer Perspectives on Online Advertising

Moderator, Chris Hoofnagle

The NYT recently reported that advertisers won’t target ads to you if you search on AIDS, but might if you search for information on warts.

Norman I. Silber, Hofstra University School of Law

Rather than traditional consumer deception/unfairness concerns, we’re increasingly focused on privacy. We should also discuss consumer vulnerability to affective appeals rather than rational, and the impact of information source masking on consumers. We may want to regulate certain foreseeable practices.

The history of advertising is one in which consumers have been subjected to ever more affective appeals and unverifiable but scientific-sounding claims. Advertisers have tried subliminal appeals. Online advertising has to be put in a context, which includes product placement.

What continuity is there between older practices and behavioral advertising? The FTC staff: behavioral ads have benefits, but the practice is largely invisible. Targeting basketball ticket ads based on geography to be for the “Cal-Berkeley” game or the “USC” game, depending on location, seems fine. But if the advertiser knows that the target has a big plasma screen, and modifies the ad to assert that games are often “blacked out,” is there a problem? What if that’s a true statement in general, but this game isn’t blacked out? What if the advertiser knows the target is wealthy and sets a higher price for her than for others? What if the advertiser knows that the fan has Paypal, Visa, and Mastercard, and the advertiser accepts all three, but only gives her the Mastercard option because that’s the least expensive for the advertiser?

What Women Want: Mel Gibson gets Helen Hunt to fall in love with him by reading her mind and (inauthentically) repeating her thoughts. This is the worry.

John Horrigan, Pew Internet and American Life Project

Gathering info online is a way to minimize risks endemic to any purpose, but many online users see the internet as a risky place to do business. Dec. 2007 survey of internet users: the internet is convenient, saves time, offers bargains. But there’s significant worry over security, and frustration over finding information and the complexity of online shopping. The lower a consumer’s income, the more she worries about sending credit card information online and the fewer benefits she sees to online shopping. The story is similar but not as dramatic with respect to age (the older, the more worries).

New survey, forthcoming: where do online resources fit when buying music? When music buyers are asked where they hear about music they purchase, they say (1) radio, TV, or movie; (2) family or friends; and (3) various online tools. Moreover, 36% say that online information had a major (9%) or minor (27%) role. So even in music, where the internet has been so important, the internet comes in third.

Cellphone purchases: For researching, people used (1) expert/salesperson; (2) store; (3) internet, mostly provider’s site, and also rating sites. Role in purchase: 73% said major (27%) or minor (46%) role. A cellphone is a commitment good, so consumers are drilling down more.

Real estate: real estate searchers are equally likely to cite the internet, real estate agents, and newspaper ads, and to find them all influential.

Online information is only part of the info pathways in consumer choice, and not always influential. And people who worry about online info security are less likely to use the internet when making buying decisions—even searching for information. Security of credit card worries depresses internet use in general. Since switching is so easy for shoppers, online advertisers have clear incentives to promose a trustworthy and secure e-shopping environment. The internet is not as useful for lower-income people, who are arguably the most likely to benefit from time-saving and other efficiencies.

Joel Winston, Federal Trade Commission

Disclaimer: These are his own views, not official FTC positions. Consumers have a general feeling of lack of control: info is being collected and used in ways they don’t understand/control—everything from identity theft to government surveillance to advertiser uses. Every time they read about a data breach, they worry about their own information. About 71% are generally aware that online activities may be tracked, but the process is opaque to them, especially about how the info might be used or disclosed.

Most think that they should at least have the opportunity to opt out, and in fact that they should have to opt in.

The FTC has encouraged self-regulation as the right approach for a dynamic marketplace. Principles: disclosure; reasonable security and limited data retention. What about using tracking data for secondary purposes? If it’s disclosed to other parties, it may be of great concern to consumers, or if it’s personally identifying information. Some participants in town halls suggested do-not-track as an analogue to do-not-call, but the logistics are in doubt.

Mark Cooper, Consumer Federation of America

Online ads are Dr. Jekyll/Mr. Hyde. People want caller ID for themselves, but they don’t want to show their info to others. There’s a privacy/efficiency tradeoff. His question: how much info do I have to give advertisers to substantially improve on the 20th century? His answer: not much, and certainly not as much as they want, as illustrated by the morning tutorials.

Everyone hates TV ads: consumers; advertisers (don’t know if it works; it’s expensive); media critics (shows can’t create audiences without advertising, so advertisers heavily influence what gets on the air: “Why is this show so dumb?”). Newspapers are clearly better, even though ads are a bigger percentage—easy to skip, easy to store for later reference, and tends to be more useful—what’s in the supermarket at what price, or what are car dealerships charging, instead of image awareness.

One-way push advertising was useless; internet allows a two-way conversation: a telephone instead of a megaphone. But do consumers know they’re involved in a conversation? Advertisers chase eyeballs rather than trying to create an audience.

Online ads can more easily be closed than TV ads—advertisers hate the TiVo. So online ads can be less intrusive in experience, but more intrusive in terms of data gathering and targeting. Ubiquity-wise, online ads are also better than TV and no worse than newspapers. Very local advertisers can get into the market, and can even sell nationally through websites when they couldn’t afford national TV ads. There are significant possibilities for improving efficiency.

The Mr. Hyde part: Behavioral tracking and targeting is inherently deceptive. If we can restrict it to contextual ads, we can get the benefits without the costs of tracking. But contextual ads sell out immediately: context is key. The more you try to find categories of people, the more you go to the 20th century TV model of trying to find a demographic. Contextual ads can provide most of the benefits without the privacy harms.

What’s available today doesn’t approach informed consent. The data suggest that 85% of sites give privacy statements, but 99% are incomprehensible to consumers.

In the regime we have now, inertia and ignorance work to the benefit of the advertiser. Most people can’t deal with the tech. If you shift to opt-in, the advertisers will tell you, no one will do it. An easy, uniform opt-out (do not track) would split the difference.

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