Monday, August 30, 2010

What is the benefit of freaking customers out?

Miguel Helft and Tanzina Vega at the New York Times have a front page article today, "Retargeting Ads Follow Surfers to Other Sites", on a form of personalized web advertising now being called retargeting.

An excerpt:
People have grown accustomed to being tracked online and shown ads for categories of products they have shown interest in, be it tennis or bank loans.

Increasingly, however, the ads tailored to them are for specific products that they have perused online. While the technique, which the ad industry calls personalized retargeting or remarketing, is not new, it is becoming more pervasive as companies like Google and Microsoft have entered the field. And retargeting has reached a level of precision that is leaving consumers with the palpable feeling that they are being watched as they roam the virtual aisles of online stores.

In remarketing, when a person visits an e-commerce site and looks at say, an Etienne Aigner Athena satchel on, a cookie is placed into that person’s browser, linking it with the handbag. When that person, or someone using the same computer, visits another site, the advertising system creates an ad for that very purse.
The article later goes on to contrast this technique of following you around with products you looked at before with behavioral targeting like Google is doing, which learns your broader category interests and shows ads from those categories.

If the goal of the advertising is to be useful and relevant, though, I think both of these are missing the mark. What you want to do is help people discover something they want to buy. Since the item they looked at before obviously wasn't quite right -- they didn't buy it after all -- showing that again doesn't help. Showing closely related alternatives, items that people might buy after rejecting the first item, could be quite useful though.

As marketing exec Alan Pearlstein says at the end of the NYT article, "What is the benefit of freaking customers out?" Remarketing freaks people out. If we are going to do personalized advertising, the goal should be to have the advertising be useful, either by sharing value with consumers using coupons as Pearlstein suggests, or by helping consumers find something interesting that they wouldn't have discovered on their own.

But, publishers should be careful when working with these new ad startups. A startup has a huge incentive to maximize short-term revenue and little incentive to maximize relevance. For the startup, as long as it brings in more immediate revenue, it is perfectly fine to show annoying ads that freak customers out and drive many away. Publishers need to force the focus to be on the value of the ads to the consumer so their customers are happy, satisfied, and keep coming back.


Barry Kelly said...

Or, you end up spilling the beans on purchases that are meant to be clandestine, because they were supposed to be a surprise, or any number of other reasons.

It's like the sales guy from the store following you down the road, into all the other shops, and then inviting himself round to your home for dinner.

Eric Goldman said...

My understanding is that retargeted ads have a noticeably higher clickthrough rates than other ads, so I wouldn't be so quick to assume that consumers don't benefit from the reminder. Eric.

Greg Linden said...

Hi, Eric. To be clear, the point I am trying to make is that short-term measures like CTR or immediate revenue might improve from putting up annoying or freaky ads, but long-term revenue often suffers because of drops in user satisfaction and return rates. Popup ads, for example, also have higher clickthrough rates, but they are well known to be annoying and drive away traffic.

Chris Zaharias said...

Hi Greg - as I commented in the NYT article

"NYT, WSJ & other bastions of enlightened journalism initially wrote fear-mongering articles about paid search ads when they came out in 2000-2002; now they write about the perils of retargeting. The reality is retargeting will become de rigeur, and the only issues significant numbers of consumers have with it result from the sloppy, 1st-generation technologies being deployed. Just as early paid search systems were improved upon over time, the same will happen with retargeting, and that will assuage consumers.

When retargeting is bad, it's not that consumers find it intrusive, but rather that the system behind it is unintelligent. Twitter is *full* of consumers griping that systems mentioned in this article:

a) make no distinction whatsoever in their targeting between people who've looked at a product & bought it vs people who looked & didn't buy. Of course people are going to be annoyed when they see ads following them around the web for the product they just bought. A good retargeting system should be able to understand consumer intent & pick in real-time which product to show, yet most systems simply uses custom Javascript to scrape the product(s) you view and store them in your cookie, with no thought given to buyers vs non-buyers. Here's a wild thought: perhaps the user didn't convert because they didn't like the offer on merchant's site - so another one would be better, and perhaps one that's not already stored in user's cookie.

b) have no sense of frequency capping, leading to the annoying phenomenon of the consumer being shown the same ad 10 times, literally following them everywhere they go. Frequency capping is the most basic of display ad concepts, but perhaps when vendors charge on a CPC basis it results in a level of frequency that annoys customers (but makes the vendor lots of money).

Anonymous said...

Somehow, I feel this tweet I saw is appropriate to repeat here: "I still can't stand you, guy Twitter keeps recommending to me."

Rebecca said...

I agree with Chris - he touched on two of the most important factors in retargeting that's done correctly: Frequency caps to control how many and how often the ads are served, and conversion filters, which prevent ads from being displayed to people who have already made a purchase. The fact is, we're all going to be exposed to ads wherever we go online. Doesn't it make sense that those ads are for things we like and can actually use? It's all about balance, but when it's done right it can actually be beneficial to the consumer. In case anyone is interested, here's a post we did a while back that addresses removing the creepy factor from retargeting:

Thanks for the post - I enjoy reading the differing opinions and insightful thoughts.