Marketers Must Monitor Possible Legislation on Behavioral Targeting

Social networks are growing more popular and, as a result, government organizations are considering passing new laws to protect consumer information. This development could negatively affect marketers trying to reach  consumers.  How much will restrictive legislation change the nature of online advertising? Two academic researchers recently published their findings on this topic after they studied the changes in privacy laws made in the European Union.

These researchers surveyed over 3.3 million users and studied their behavior as they were exposed to 9,596 display ad campaigns. In general, the findings were as follows:

  • When marketers are restricted from behaviorally targeting consumers, purchase intent is significantly affected.
  • Web sites that are general purpose, such as news sites, experienced a bigger drop in effectively influencing purchasers once behavioral targeting was enacted.
  • A higher loss of influence was also associated with small ads and ads that lacked interactive features once behavioral targeting was enacted.

The researchers also attempted to quantify the dollar impact on U.S. marketers if behavioral targeting is restricted. Goldfarb and Tucker, the study’s authors, say that such restriction is 65% effective. In dollar terms this means that marketers who now spend $8 billion on display advertising would have to spend up to $22 billion to achieve the same reach they’re currently getting from display. Goldfarb and Tucker called these projections a worst-​case scenario and suggest that marketers and content sites would likely find other ways to advertising online.

However, the potential restriction on online advertising looms large on the political landscape. And the about-​face move taken by Facebook last month in an attempt to appease its user community suggests that social networks and online marketers shouldn’t assume that they can play fast and loose with consumers’ personal information. Expect marketers to closely watch the national discussion on this topic.

[Source: Privacy Regulation and Online Advertising. Goldfarb and Tucker. University of Toronto and MIT Sloan School of Management. May 2010. Web. 1 Jun. 2010] 
Kathy Crosett
Kathy is the Vice President of Research for SalesFuel. She holds a Masters in Business Administration from the University of Vermont and oversees a staff of researchers, writers and content providers for SalesFuel. Previously, she was co-​owner of several small businesses in the health care services sector.