What is online behavioral advertising and how does it work?

June 27, 2010 by
Filed under: Uncategorized 

I met a hi-tech entrepreneur who told me that the Web is nothing more than a marketing platform. We consume content while being provided with adverts. That, he summarised, is the business model of the internet. As we know, advertisers want to target their ads as precisely as possible. On television they do this by researching or guessing who is watching what. On the internet, advertisers are able to know exactly who is seeing which ads, and this makes internet advertising a very attractive proposition.

But how does it work? Look at this diagram:

The first thing to note is that there are three main actors: websites, who publish adverts; advertising networks, who buy advertising space on websites; and companies, who pay advertising networks to advertise their wares. This is very much the old media model. Where it becomes “new media”, though, is in the way that the advertising networks are able to track our online behavior. When I visit Website 1, I get a cookie from whichever advertising networks advertise on that site. This also happens when I visit Websites 2, 3 and 4. The clever part is that if any of Websites 2, 3 and 4 are also part of an advertising network’s network, then that network knows that I’ve been to those sites too. The bigger the advertising network, the more it knows about my surfing behavior (and hence about my consumption behavior).

It is important to realise that, unlike with television audiences, online advertisers do not have to deal with aggregates of audiences, but that they can individually tailor the adverts that we read. When placing adverts on television, an advertiser can quite confidently predict that the audience of a football match will be mostly male. But when you visit a site in the network of an online advertiser, they don’t have to guess what your interests are; if their network is large enough, they know exactly what you are interested in, which sites you have visited, what you did there, how long you were there, and so on and so on.

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