Lentis/Targeted Advertising

Introduction

Targeted advertising is when companies create advertisements based on consumer traits. It originated with television ads but this chapter focuses on targeted advertising on the internet. There are three main aspects that companies consider when creating these ads. The first is demographics which include sex, age, race, income, etc. The second is psychographics which include people's views, opinions, lifestyles, attitudes, and values. The last is behavioral variables which companies access using costumers' browsing and purchasing histories.

Generally, targeted ads work by storing user information in browser cookies. These cookies allow ad networks to share information and target future advertisements directly to the relevant consumers.

History

The term "targeted advertising" first gained significant traction in the early 1970s, and its usage increased largely through the 1990s. In 1972, a United States patent was filed for a Television receiver cut-in device. This device allowed television networks to show different commercials to different audiences viewing the same program. For the first time, television commercials could target specific geographic locations. Tim Berners-Lee invented the World Wide Web in 1989, creating a platform that could fully take advantage of targeted advertising. Today, internet ad networks use information that they accumulate about user demographics, psychographics, and behavior to target advertisements directly to those most likely to respond favorably.

Participants

Campaign for Commercial-Free Childhood (CCFC)

The Campaign for Commercial-Free Childhood (CCFC) fights against targeted advertising. This organization's mission is to limit the amount of advertisements that children are exposed to promote a healthier, family lifestyle. This company recently sought out a new application called YouTube Kids that shows several different kids' shows. The application also shows ads that pertain to children's interests such as for Fisher Price, Lego, My Little Pony, and more based on the show selected. For example, when a user selects the Lego episode with Disney princesses, an ad is shown for Barbie because it is likely Barbie dolls will appeal to the same audience who selected a Disney princesses show. The CCFC believes that these ads are inappropriate for children's shows and that they corrupt their entertainment so they are making a petition to stop these ads to protect their kids from unfair marketing.

Federal Trade Commission

The Federal Trade Commission, or FTC, is an independent U.S. government agency that "works to advance policies that protect consumers and promote competition." Their Division of Advertising Practices "protects consumers from unfair or deceptive advertising and marketing practices that raise health and safety concerns, as well as those that cause economic injury". These responsibilities make the FTC the enforcer for targeted advertising.

Examples of such enforcement include regulation of tobacco advertisements and health warnings and dietary supplement company claims in advertisements.

Consumers

Consumers receive the targeted advertising. They do have the ability to avoid this through ad blockers. Their agendas conflict in that some prefer to block ads, some wish the ads were blocked but do not know how to do so, and some enjoy the more-relevant ads. These consumers "may gain by witnessing more relevant ads", but Johnson's research in the RAND Journal of Economics shows they may receive more ads as a result of being targeted. In addition, improved information accuracy can lead to ads that consumers do not want to see as opposed to those of less precision. This means that a consumer who has shopped and bought a Patagonia jacket may not want more Patagonia jackets advertised to them, but rather would love to see new Patagonia wool shirts.

Privacy Advocacy Groups

Groups such as the Electronic Privacy Information Center (EPIC), a public interest group that focuses public attention on emerging privacy and civil liberties issues, get involved with companies invading privacy with targeted advertising. For example, the executive director of EPIC, Marc Rotenburg, publicly spoke out against Google ad tracking in 2009, calling it a privacy "disaster". These groups can lobby the FTC and other government organizations to change or enforce regulations.

Uses & Benefits

Companies

As proven by Johnson's research in the RAND Journal of Economics, "improved targeting raises the profits of all firms." For example, Target's use of targeted advertising cause a $20 billion increase in revenues, since they started reaching the correct consumers with their marketing. It is also beneficial on the cost side since less money needs to be spent on advertising if they already know which audiences to go after.

In addition, there are firms who sell data analytic expertise to find the right consumers to companies who need it, and therefore depend on targeted advertising for profits. To illustrate, ComScore helps "measure what matters to make cross-platform audiences and advertising more valuable."

Consumers

Targeted advertising saves the time and money of a consumer by advertising products they likely want. In addition, there can be psychological benefits for consumers from it. According to a study by Harvard Business Review, targeted advertising can also "change how you think about yourself". In their study of 188 undergraduate students, they found that participants who had a sophisticated restaurant marketed to them online were more interested in the restaurant and thought of themselves as more sophisticated if they were behaviorally targeted (targeted based on browsing history) rather than being targeted based on demographics or not targeted at all. In addition, they found that people who are behaviorally targeted for eco-friendly products think of themselves as more eco-friendly and were more likely to buy the product.

These psychological effects can be interpreted as beneficial for the person, since they increase self-esteem and cause higher sales of products that can help humans such as eco-friendly or healthy ones.

In addition, targeted advertisements have implications on politics with consumers. A study by Lapinski and Clinton, 2 political science professors, find no evidence that negative political advertisements cause decreased voter turnout, but find little evidence that it increases voter turnout. Although they may skew the image of political candidates and bring resentment, these targeted advertisements do not discourage voting.

Controversies

There are a variety of moral, ethical, and legal controversies that arise from targeted advertising.

Privacy

There is a question of privacy when it comes to targeted advertising and the storage of user information in browser cookies. Interest groups such as EPIC, for example, have filed complaints with the Federal Trade Commission regarding Google's merger with Double-click, the worlds largest internet advertising firm. This merger gives Google an increased ability to record, analyze, and track the behavior of internet users.

Target Case Study

Recently, Target found itself in a scandal due to targeted advertising. Target hired Andrew Pole as its statistician to observe trends in Target's purchasing history. He searched for trends in many different demographics. Particularly for pregnant women, he found that they were likely to buy cotton ball and unscented lotion during their pregnancy. When a Target noticed a teenage girl browsing for these items on its website, it send a coupon to her house that advertised baby clothes and cribs. The girl's father was irate and called Target exclaiming, "My daughter got this in the mail! She's still in high school... Are you trying to encourage her to get pregnant." Target apologized several times and said they did not know how this happened. A few weeks later, the girl's father called Target and says, "I had a talk with my daughter. It turns out there has been some activities in my house I haven't been aware of. She's due in August. I owe you an apology." Target was able to find out a teenage girl was pregnant before her own father did with her browsing history and targeted advertising.

Skewed Information

Sometimes with targeted advertising, information that is inherently biased can be presented as if it is objective. For example, Facebook allows users to sponsor posts, thus promoting them to certain audiences. By targeting posts and advertisements to demographics that are likely to respond favorably, businesses, politicians, and social groups can obtain a disproportionately positive response. Additionally, if a sponsored post is shared, the new viewers will not see that it was initially sponsored. Targeted advertising has a huge application for political campaigns. Leading up to the 2016 election, for example, Pro-Hillary Clinton groups launched an enormous ad campaign, directed at and targeted towards female millennials. These ads contained Donald Trump quotes that were known to be generally inflammatory towards this specific demographic. Targeting these ads specifically to young women can ensure that the quotes will elicit disgust. Ads like this, however, can lead to the solidification of social media echo chambers. Presenting information only to the people who will respond favorably to it can reinforce personal beliefs and increase the polarization of certain issues.

Discrimination: The Fair Housing Act

The Fair Housing Act of 1968 prohibits discrimination, when buying or renting a home, on the basis of race, color, origin, religion, sex, disability, and the presence of children. The ad targeting tools on Facebook allowed individuals to target ads to individuals based on things such as ethnic affinity, with the option to include or exclude certain groups. In 2016, ProPublica completed a study by purchasing some of these Facebook housing ads to test the limits of their discrimination. After outcry from civil rights leaders and policy makers, Facebook has announced that it will take extra measures to prohibit such housing discrimination on the basis of ethnicity. This case shows similarities to a 1989 case where the New York Times was successfully sued under the Fair Housing Act for publishing housing ads that appealed only to Whites. All pictures in housing ads must now be racially representative of the areas.

Conclusion

Targeted advertising allows businesses to direct their advertisements to the specific people or groups who will find it most relevant or interesting. Targeted ads save businesses money, as it allows a smaller overall number of ads to still reach the same target market. They also offer a unique web experience, tailored to every user, which some users enjoy. There are several controversies surrounding targeted advertising however, including a loss of privacy, and the fact that it enables some discriminatory practices.