A Guide to the Digital Advertising Industry That's Watching Your Every Click

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In this excerpt from his new book, The Daily You, University of Pennsylvania professor Joseph Turow takes you on a tour of the industry that's trafficking in the data you generate every day on the Internet. You don't have to be a privacy stickler to be worried.

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At the start of the 21st century, the advertising industry is guiding one of history's most massive stealth efforts in social profiling. At this point you may hardly notice the results of this trend. You may find you're getting better or worse discounts on products than your friends. You may notice that some ads seem to follow you around the internet. Every once in a while a website may ask you if you like a particular ad you just received. Or perhaps your cell phone has told you that you will be rewarded if you eat in a nearby restaurant where, by the way, two of your friends are hanging out this very minute.

You may actually like some of these intrusions. You may feel that they pale before the digital power you now have. After all, your ability to create blogs, collaborate with others to distribute videos online, and say what you want on Facebook (carefully using its privacy settings) seems only to confirm what marketers and even many academics are telling us: that consumers are captains of their own new-media ships.

But look beneath the surface, and a different picture emerges. We're at the start of a revolution in the ways marketers and media intrude in -- and shape -- our lives. Every day, most if not all Americans who use the internet, along with hundreds of millions of other users from all over the planet, are being quietly peeked at, poked, analyzed and tagged as they move through the online world. Governments undoubtedly conduct a good deal of snooping, more in some parts of the world than in others. But in North America, Europe, and many other places, companies that work for marketers have taken the lead in secretly slicing and dicing the actions and backgrounds of huge populations on a virtually minute-by-minute basis. Their goal is to find out how to activate individuals' buying impulses so they can sell us stuff more efficiently than ever before. But their work has broader social and cultural consequences as well. It is destroying traditional publishing ethics by forcing media outlets to adapt their editorial content to advertisers' public-relations needs and slice-and-dice demands. And it is performing a highly controversial form of social profiling and discrimination by customizing our media content on the basis of marketing reputations we don't even know we have.

Consider a fictional middle class family of two parents with three children who eat out a lot in fast-food restaurants. After a while the parents receive a continual flow of fast-food restaurant coupons. Data suggest the parents, let's call them Larry and Rhonda, will consistently spend far more than the coupons' value. Additional statistical evaluations of parents' activities and discussions online and off may suggest that Larry and Rhonda and their children tend toward being overweight. The data, in turn, results in a small torrent of messages by marketers and publishers seeking to exploit these weight issues to increase attention or sales. Videos about dealing with overweight children, produced by a new type of company called content farms, begin to show up on parenting websites Rhonda frequents. When Larry goes online, he routinely receives articles about how fitness chains emphasize weight loss around the holidays. Ads for fitness firms and diet pills typically show up on the pages with those articles. One of Larry and Rhonda's sons, who is 15 years old, is happy to find a text message on his phone that invites him to use a discount at an ice cream chain not too far from his house. One of their daughters, by contrast, is mortified when she receives texts inviting her to a diet program and an ad on her Facebook page inviting her to a clothing store for hip, oversized women. What's more, people keep sending her Twitter messages about weight loss. In the meantime, both Larry and Rhonda are getting ads from check-cashing services and payday-loan companies. And Larry notices sourly on auto sites he visits that the main articles on the home page and the ads throughout feature entry-level and used models.

His bitterness only becomes more acute when he describes to his boss the down-market Web he has been seeing lately. Quite surprised, she tells him she has been to the same auto sites recently and has just the opposite impression: many of the articles are about the latest German cars, and one home-page ad even offered her a gift for test-driving one at a dealer near her home.

This scenario of individual and household profiling and media customization is quite possible today. Websites, advertisers, and a panoply of other companies are continuously assessing the activities, intentions, and backgrounds of virtually everyone online; even our social relationships and comments are being carefully and continuously analyzed. In broader and broader ways, computer- generated conclusions about who we are affect the media content-the streams of commercial messages, discount offers, information, news, and enter- tainment-each of us confronts. Over the next few decades the business logic that drives these tailored activities will transform the ways we see ourselves, those around us, and the world at large. Governments too may be able to use marketers' technology and data to influence what we see and hear.

From this vantage point, the rhetoric of consumer power begins to lose credibility. In its place is a rhetoric of esoteric technological and statistical knowledge that supports the practice of social discrimination through profiling. We may note its outcomes only once in a while, and we may shrug when we do because it seems trivial -- just a few ads, after all. But unless we try to understand how this profiling or reputation-making process works and what it means for the long term, our children and grandchildren will bear the full brunt of its prejudicial force.

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The best way to enter this new world is to focus on its central driving force: the advertising industry's media-buying system. Media buying involves planning and purchasing space or time for advertising on outlets as diverse as billboards, radio, websites, mobile phones, and newspapers. For decades, media buying was a backwater, a service wing of advertising agencies that was known for having the lowest-paying jobs on Madison Avenue and for filling those jobs with female liberal arts majors fresh out of college. But that has all changed. The past twenty years have seen the rise of "media agencies" that are no longer part of ad agencies, though they may both be owned by the same parent company. Along with a wide array of satellite companies that feed them technology and data, media agencies have become magnets for well-remunerated software engineers and financial statisticians of both sexes.

In the United States alone, media-buying agencies wield more than $200 billion of their clients' campaign funds; they use these funds to purchase space and time on media they think will advance their clients' marketing aims. But in the process they are doing much more. With the money as leverage, they are guiding the media system toward nothing less than new ways of thinking about and evaluating audience members and defining what counts as a successful attempt to reach them. Traditionally, marketers have used media such as newspapers, magazines, radio, billboards, and television to reach out to segments of the population through commer- cial messages. These advertisers typically learned about audience segments from survey companies that polled representative portions of the population via a variety of methods, including panel research. A less prestigious direct-marketing business has involved contacting individuals by mail or phone. Firms have rented lists of public data or purchase information that suggests who might be likely customers.

The emerging new world is dramatically different. The distinction between reaching out to audiences via mass media and by direct-response methods is disappearing. Advertisers in the digital space expect all media firms to deliver to them particular types of individuals-and, increasingly, particular individuals- by leveraging a detailed knowledge about them and their behaviors that was unheard of even a few years ago. The new advertising strategy involves drawing as specific a picture as possible of particular individuals based in large part on measurable physical acts such as clicks, swipes, mouseovers, and even voice commands. The strategy uses new digital tracking tools like cookies and beacons as well as new organizations with names like BlueKai, Rapleaf, Invidi, and eXelate. These companies track people on websites and across websites in an effort to learn what they do, what they care about, and who their friends are. Firms that exchange the information often do ensure that the individuals' names and postal addresses remain anonymous-but not before they add specific demographic data and lifestyle information. For example:

  • Rapleaf is a firm that claims to help marketers "customize your customers' experience." To do that, it gleans data from individual users of blogs, internet forums, and social networks. It uses ad exchanges to sell the ability to reach those individuals. Rapleaf says it has "data on 900+ million records, 400+ million consumers, [and] 52+ billion friend connections." Advertisers are particularly aware of the firm's ability to predict the reliability of individuals (for example, the likelihood they will pay their mortgage) based on Rapleaf's research on the trustworthiness of the people in those individuals' social networks.
  • A company called Next Jump runs employee discount and reward programs for about one-third of U.S. corporate employees. It gets personal information about all of them from the human relations departments of the companies and supplements that information with transactional data from the manufacturers it deals with as well as from credit companies. Armed with this combination of information, Next Jump can predict what people want and what they will pay for. It also generates a "UserRank" score for every employee based on how many purchases a person has made and how much he or she has spent. That score plays an important role in determining which employee gets what product e-mail offers and at what price.
  • A firm called The Daily Me already sells an ad and news personalization technology to online periodicals. If a Boston Globe reader who reads a lot of soccer sports news visits a Dallas Morning News site, the Daily Me's technology tells the Dallas Morning News to serve him soccer stories. Moreover, when an ad is served along with the story, its text and photos are instantly configured so as to include soccer terms and photos as part of the advertising pitch. A basketball fan receiving an ad for the same product will get language and photos that call out to people with hoop interests.

These specific operations may not be in business a few years from now. In the new media-buying environment companies come and go amid furious competition. The logic propelling them and more established firms forward, though, is consistent: the future belongs to marketers and media firms- publishers, in current terminology-that learn how to find and keep the most valuable customers by surrounding them with the most persuasive media mate- rials. Special online advertising exchanges, owned by Google, Yahoo!, Microsoft, Interpublic, and other major players, allow publishers to auction and media agencies to "buy" individuals with particular characteristics, often in real time. That is, it is now possible to buy the right to deliver an ad to a person with specific characteristics at the precise moment that that person loads a Web page. In fact, through an activity called cookie matching, which I discuss in detail later, an advertiser can actually bid for the right to reach a particular individual whom the advertiser knows from previous contacts and is now tracking around the Web. Moreover, the technology keeps changing. Because consumers delete Web cookies and marketers find cookies difficult to use with mobile devices, technology companies have developed methods to "fingerprint" devices permanently and allow for persistent personalization across many media platforms.

The significance of tailored commercial messages and offers goes far beyond whether or not the targeted persons buy the products. Advertisements and discounts are status signals: they alert people as to their social position. If you consistently get ads for low-priced cars, regional vaca- tions, fast-food restaurants, and other products that reflect a lower-class status, your sense of the world's opportunities may be narrower than that of someone who is feted with ads for national or international trips and luxury products. Moreover, if like Larry and Rhonda you happen to know that your colleague is receiving more ads for the luxury products than you are, and more and better discounts to boot, you may worry that you are falling behind in society's estimation of your worth.

In fact, the ads may signal your opportunities actually are narrowed if marketers and publishers decide that the data points-profiles-about you across the internet position you in a segment of the population that is relatively less desirable to marketers because of income, age, past-purchase behavior, geographical location, or other reasons. Turning individual profiles about individual evaluation is what happens when a profile becomes a repu- tation. Today individual marketers still make most of the decisions about which particular individuals matter to them, and about how much they matter. But that is beginning to change as certain publishers and data providers-Rapleaf and Next Jump, for example-allow their calculations of value to help advertisers make targeting decisions. In the future, these calculations of our marketing value, both broadly and for particular prod- ucts, may become routine parts of the information exchanged about people throughout the media system.

The tailoring of news and entertainment is less advanced, but it is clearly under way. Technologies developed for personalized advertising and coupons point to possibilities for targeting individuals with personalized news and entertainment. Not only is this already happening, the logic of doing that is becoming more urgent to advertisers and publishers. Advertisers operate on the assumption that, on the internet as in traditional media, commercial messages that parade as soft (or "human interest") news and entertainment are more persuasive than straightforward ads. Publishers know this too, and in the heat of a terrible economic downturn even the most traditional ones have begun to compromise long-standing professional norms about the separation of advertising and editorial matter. And in fact many of the new online publishers-companies, such as Demand Media, that turn out thousands of text and video pieces a day-never really bought into the old-world ideas about editorial integrity anyway. What this means is that we are entering a world of intensively customized content, a world in which publishers and even marketers will package personalized advertisements with soft news or entertainment that is tailored to fit both the selling needs of the ads and the reputation of the particular individual.

The rise of digital profiling and personalization has spawned a new industrial jargon that reflects potentially grave social divisions and privacy issues. Marketers divide people into targets and waste. They also use words like anonymous and personal in unrecognizable ways that distort and drain them of their traditional meanings. If a company can follow your behavior in the digital environment-an environment that potentially includes your mobile phone and television set-its claim that you are "anonymous" is meaningless. That is particularly true when firms intermittently add off-line information such as shopping patterns and the value of your house to their online data and then simply strip the name and address to make it "anony- mous." It matters little if your name is John Smith, Yesh Mispar, or 3211466. The persistence of information about you will lead firms to act based on what they know, share, and care about you, whether you know it is happening or not.

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All these developments may sound more than a little unsettling; creeped out is a phrase people often use when they learn about them. National surveys I have conducted over the past decade consistently suggest that although people know companies are using their data and do worry about it, their understanding of exactly how the data are being used is severely lacking. That of course shouldn't be surprising. People today lead busy, even harried, lives. Keeping up with the complex and changing particulars of data mining is simply not something most of us have the time or ability to do. There are many great things about the new media environment. But when companies track people without their knowledge, sell their data without letting them know what they are doing or securing their permission, and then use that data to decide which of those people are targets or waste, we have a serious social problem. The precise implications of this problem are not yet clear. If it's allowed to persist, and people begin to realize how the advertising industry segregates them from and pits them against others in the ads they get, the discounts they receive, the TV-viewing suggestions and news stories they confront, and even the offers they receive in the super- market, they may begin to suffer the effects of discrimination. They will likely learn to distrust the companies that have put them in this situation, and they may well be incensed at the government that has not helped to prevent it. A comparison to the financial industry is apt. Here was an industry engaged in a whole spectrum of arcane practices that were not at all transparent to consumers or regulators but that had serious negative impact on our lives. It would be deeply unfortunate if the advertising system followed the same trajectory.

Despite valiant efforts on the part of advocacy groups and some federal and state officials, neither government rulings nor industry self-regulation has set policies that will address these issues before they become major sources of widespread social distress. Part of the reason for the lack of action may be that neither citizens nor politicians recognize how deeply embedded in American life these privacy-breaching and social-profiling activities are. Few individuals outside advertising know about the power of the new media- buying system: its capacity to determine not only what media firms do but how we see ourselves and others. They don't know that that system is working to attach marketing labels to us based on the clicks we make, the conversations we have, and the friendships we enjoy on websites, mobile devices, iPads, supermarket carts, and even television sets. They don't know that the new system is forcing many media firms to sell their souls for ad money while they serve us commercial messages, discounts, and, increas- ingly, news and entertainment based on our marketing labels. They don't realize that the wide sharing of data suggests that in the future marketers and media firms may find it useful to place us into personalized "reputation silos" that surround us with worldviews and rewards based on labels marketers have created reflecting our value to them. Without this knowledge, it is hard to even begin to have broad-based serious discussions about what society and industry should do about this sobering new world: into the twenty-first century the media-buying system's strategy of social discrimination will increasingly define how we as individuals relate to society-not only how much we pay but what we see and when and how we see it.

Until now, the advertising industry's new media-buying processes have been virtually hidden to all but a relatively few practitioners in the field. No books have been written about the business, and while some excellent trade publications follow its developing story continuously, the particulars they present are more or less opaque to those outside the industry. A few experts in the media-buying field, in fact, told me that they don't try to explain the details of what they do to their clients, the advertisers, or their bosses in the upper reaches of their advertising agencies. They simply wouldn't grasp it. All the clients and the bosses care about, these media buying experts added, is whether they reach their targets with an appropriate return on investment. But from a consumer perspective, from the standpoint of a society aiming for transparency and fairness, this black-box approach is not acceptable. We need to understand the industrial forces that are defining our identities, our worth, and the media environments we inhabit so that we can decide what, if anything, to do about them. Academics, advocates, and government leaders must know enough about this business and its workings to be able to ask hard questions and formulate realistic policy suggestions when they are needed.

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The aim of my book, then, is to describe the brave new world that is the media-buying system, especially as it relates to the internet and emerging digital technologies. The chapters that follow detail the media-buying system's tangled history, reveal its logic and operations, identify the problems it poses for individuals and society, and suggest solutions. Chapter 1 starts by challenging the common assertion, made not only by marketers but by many academics, that the consumer is king in the new media environment. This idea is most closely associated with Nicholas Negroponte's pioneering and still influential account of The Daily Me. In his 1994 best seller, Being Digital, Negroponte predicted that the power of digital media would give citizens an unprecedented degree of control over their media environments. He illustrated this new control with the hypothetical example of The Daily Me, an online newspaper whose content would be customized to suit the interests and beliefs of individual readers. Many years later, as I show here, the content customization that Negroponte predicted is taking off. The crucial difference, however, is that much of the content is not being customized and personalized by consumers themselves.

Advertisements, discounts, information, and entertainment are increasingly customized by a largely invisible industry on the basis of a vast amount of information that we likely don't realize it is collecting as a result of social profiles and reputations it assigns us and never discloses, and about which we are likely ignorant.

My book attempts to address this knowledge and power imbalance. By looking under the hood of the internet and other digital media, we see that media buyers play key roles in whether, when, and how people's attention is made in the world. To recognize such immense power is not to deny the spaces and opportunities for freedom, participation, and creativity that several scholars identify in the new environment. But it does make clear that the ruthlessly commercial logic and obscure social profiling practices of the new media-buying system are what dominate the emerging digital world.

Image: Based on Library of Congress public domain photos.

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Joseph Turow is a professor at the Annenberg School for Communications at the University of Pennsylvania.

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