The Future of Advertising is Here

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The team started off by breaking Mod-Pac's target market into seven submarkets, including event planners, ad agencies, and not-for-profit organizations. Each of these submarkets was further broken down according to who influenced the key purchase in each category -- in some cases a secretary can have as much influence on a buying decision as a CEO, but the two need very different sorts of pitches. In the past, for example, ClearGauge has gone after doctors' spouses to sell medical supplies and lawyers to sell commercial financial services. ClearGauge then enlisted online surveys and focus groups to uncover the hot buttons for each type of purchase influencer in each submarket. Some decision makers valued sophistication in their printing company, while others placed more emphasis on creativity, and still others on low cost. Different ads were then cooked up for the different targets, so that, for example, a creative director at an ad agency was targeted with a pitch that featured a dancing, mischievous lizard mascot, while a CFO at a nonprofit got a more sober version of the lizard with glasses and a pitch that emphasized cost-savings. To make sure each pitch ended up in front of its intended target, ClearGauge studied the click-through statistics on hundreds of business-oriented websites for banner-ad placement and paid search engines to have specific ads come up in response to some 5,000 carefully chosen terms. By obsessively monitoring how many people click on each of the ads to end up on Mod-Pac's website, and then noting what each person does at the website, ClearGauge can further refine the relevance and placement of each of the ads while weeding out the less effective efforts.

Online advertisers are about to get a new tool that will vastly increase their ability to place highly relevant ads in front of prospects. Emerging now are powerful "behavioral targeting" services that can track what an individual clicks on and looks at across a range of sites over the course of weeks and months, making it possible to build a detailed profile of that person's interests, purchases, and preferences. The companies prepared to do the tracking, including 24/7 Real Media, Blue Lithium, Dotomi, and Claria, don't capture personal information such as names or e-mail addresses -- only surfing habits -- and even then follow only people who have opted in to the tracking.

But that's enough to let advertisers do a far better job of matching pitches and prospects. At least 950 out of every 1,000 Internet automobile ads still land in front of people who aren't in the market for a car, notes Scott Eagle, chief marketing officer of Claria, based in Redwood City, Calif. "If you're starting a high-end pet-food company, you only want to talk to people who have a certain type of pet and are willing to pay a premium to feed it," he adds. "We can identify those people. Why do you need to reach anyone else?" In a study, website visitors were, on average, 14 times more likely to click on an ad when it matched their profiles, claims Eagle. He says he has already lined up more than 200 advertisers for his new tracking service and expects to reach 500 by the end of the year.

Given privacy concerns, will many Internet users opt to participate in these sorts of services? Actually, they might. Because according to a 2004 survey by the Ponemon Institute, a consultancy that specializes in Internet privacy issues and has worked with Claria, two-thirds of Internet users believe better targeted ads would be less annoying, and 45% would share personal information in exchange for that advertising relevance.

But it's not just the Internet that's poised to become a bastion of highly targeted advertising. In fact, the trend to interactive, targeted advertising is starting to break its chains to the computer screen. Even television, the grande dame of conventional mass marketing, is taking steps to offer a more focused advertising experience. For starters, A.C. Nielsen and other companies have been rolling out technology to measure more accurately who is watching which shows, providing test viewers with pagers, for example, that can measure TV-watching habits outside their homes. Experian, a consumer data company in Costa Mesa, Calif., is cross-referencing this sort of detailed TV-viewer information with vast troves of other consumer behavior data so that a network can pinpoint viewers not just by age or income but also by what products they're in the market for. "If you give people a television program that indexes well against their preferences, you'll get more mental click-through," says William Engel, co-CEO of Experian subsidiary Simmons Market Research Bureau. Some advertisers are getting even finer-tuned pitches by negotiating the ability to alter their TV ad slots in response to changing conditions. Some TV ads for Royal Caribbean Cruise Lines, for example, have been set to run only when the temperature drops below a certain point in a given market.

And even bigger changes are in the wings as television starts to morph into a more Internet-like experience. Cable provider Comcast offers advertisers in parts of Florida the chance to buy ads that run only in specific neighborhoods, so that, for example, ads for a Spanish-language newspaper appear only in heavily Latino communities. The technology to target cable ads all the way down to specific homes according to household viewing habits already exists, with deployment largely awaiting the resolution of privacy concerns. Cable companies are also experimenting with interactive channels that let viewers enlist their remote controls to click on banner ads and onscreen buttons. Video games are getting with the program too. Some are already packed with ads integrated into the cyberscenery, and a New York company called Massive has developed a technique for changing those ads to match an individual player's moves and preferences.

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David H. Freedman: A Boston-based contributing editor, Freedman is the co-author of A Perfect Mess, which examines the useful role of disorder in daily life, business, and science. @dhfreedman