Holy Grail of Targeting Is Fuel for Privacy Battle

Melding of Online and Offline Info Is Delicate Dance for Marketers, Could Raise Red Flag to Regulators

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NEW YORK (AdAge.com) -- Marketers are pushing the boundaries on data collection, but how far will regulators and the public let it go?

The latest frontier for marketers is taking offline data such as income, credit rating, home value, savings, past purchases, number of children living at home and other data, and merging that with the blooming online data stream.

JESSICA SIMPSON: Celebrity's clothing line is one of Aperture's clients.
JESSICA SIMPSON: Celebrity's clothing line is one of Aperture's clients.
The offline data -- including extremely sensitive, personally identifiable information -- has been used by the direct-marketing industry for decades. But only recently have marketers begun to connect that trove to online behavior. The resulting picture is revolutionary for marketers, but could trigger a rude awakening in the form of regulation now being considered by Congress.

One example: three-year-old data firm Aperture, a division of Datran Media, which pulls data from offline giants like Experian, Acxiom, and Nielsen's Claritas to form detailed portraits of individuals on the web, and then combines that with Datran's massive database of e-mail addresses. The difference between what Aperture is doing and others is that each cookie does represent a real consumer, albeit with personally identifiable information stripped out. Those consumers are thrown into "buckets," say, men earning $40,000 to $50,000, or other demographics useful for marketers.

When that cookie encounters a website -- an automotive site, for example -- then an advertiser would know whether to serve an ad for a Subaru or a Range Rover, depending on income and other demographic characteristics.

No longer 'no-man's land'
All the big four holding companies are working with Aperture, and many of the world's top marketers, but most would rather not talk about it. One that did, hearing-aid manufacturer Beltone, used Aperture data to figure out that they shouldn't be targeting senior citizens directly. Rather, they should be targeting the adult-female children of seniors -- moms themselves -- who may or may not have a parent living in their home, as they were responding to the ads more than seniors themselves.

That's something that might not be possible without the supporting demographic data Aperture culls from offline sources. Also using Aperture? Viacom's Nickelodeon and Camuto Group, owner of Jessica Simpson's clothing brand.

"The line between merging online and offline data isn't no-man's land anymore; it's becoming more of a common practice," said Mike Zaneis, Washington lobbyist for the Interactive Advertising Bureau.

But online-data collection is getting some scrutiny from privacy advocates, the media and the Federal Trade Commission. Last week the Wall Street Journal profiled eXelate, an Israeli firm that operates an exchange for data culled from online and offline sources. The company announced a deal with Nielsen's Claritas, which gives them data from 115 million American households.

The New York Times last week published a front-page story pointing out some of the more disconcerting consequences to all the data readily volunteered by people on the web, such as birth dates, organizational affiliations, lists of friends and family members.

The Onion dealt with the issue last week with "Google Responds to Privacy Concerns With Unsettlingly Specific Apology."

Shifting boundaries
At hearings last week, Federal Trade Commission staff and invited panelists discussed whether advances in targeting require that more types of personal information be held off-limits to marketers. In the past, marketers have drawn the line at data related to health status and sexual preference. But as targeting gets more precise, and consumers themselves volunteer more and more information online, the question is whether those categories should be expanded.

Then there's the question of whether any of this should be happening at all. "Everybody is making money off consumer data but the consumer," said Jeff Chester, executive director for the Center for Digital Democracy, who was working on a complaint last week against companies that participate in real-time bidding for consumers as they move around the web.

As an analytics firm, Aperture sees itself as competing more against Nielsen and ComScore rather than data exchanges like eXelate, which buys Aperture data, and Blue Kai, which is an exchange for e-commerce data. "It's kind of a land-grab right now, but none of them have the information we have or the discovery tools we have," said Aperture general manager Scott Knoll.

Mr. Knoll said Aperture has built a firewall that separates cookies from personally identifiable information. Moreover, you can't quite directly connect an offline address with an IP address that identifies a computer because IP addresses are randomly assigned by broadband ISPs. Even if it was possible, he said, "as a marketer, it's something I would never do."

In the past, marketers could point to the few complaints registered with state attorneys general about direct marketing to show that the public doesn't worry much about it. One exception would be telemarketing, which resulted in Do Not Call Lists. Will the public start to care when a person who is bald gets an ad for Rogaine or a person who is overweight gets one for Weight Watchers?

Today, most online targeting is based on data collected online, but that's changing, and both agencies and marketers are more interested in bringing new data to assign value to remnant ad inventory that they can buy cheaply. A host of data purveyors such as Media6Degrees, which mines social profiles for targeting information, are overlaying data to that inventory to find audiences marketers find valuable.

"Tying online to offline, or connecting a cookie to offline purchase behavior; there's usefulness in that, but it's not a trivial exercise," said Brand.net CEO Andy Atherton. "Privacy concerns need to be at the top of the stack or the clouds on the horizon are going to get bigger."

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