Wednesday, May 23, 2007

Google, Yahoo, Microsoft and Cookies

Today there was an article on ZDNET blog about how Google/Doublelclick, Yahoo/RightMedia and Microsoft/aQuantive deals is about cookies more than anything else.

I agree with the author of this article that these acquisition are not about ad serving technology but about user data and reach. I have written in my past article about how these acquisitions by these three giants were a huge steps towards building behavioral targeting networks.

The rich set of user data that these companies will be able to gather by these acquisitions is very valuable. All of these companies had cash to hire smart people and build the ad serving technology for a fraction of what they paid for acquisitions. So it is not about technology. What they could not have done on their own was the reach and rich user data. The only way to gather that kind of information was to acquire the companies which have those.

So why do they need that user data? One of the issues with advertising is that by placing contextual ads advertisers waste lots of impression because they reach a lot of people who are not even interested in their offers or products. This rich user data (tied via cookie) will provide Google, Microsoft and Yahoo understanding of which users could potentially be interested in offers/products of an advertiser. Historical user data will allow them to understand what kind of users have responded to what kind of offers/products in past. The new acquisition will also allow them to reach all those user which were earlier not in their network plus provide them more data. This will allow them to target the ads to right set of users, users who are most likely to click on an ad and convert (buy, register etc.). By generating higher click-thorough and conversion they can command premium from advertisers. Everybody benefits from this, publishers can sell their inventory for a premium, advertisers will reach right set of customers and consumers will get the offers and products they care about. The three giant (Google, Microsoft and Yahoo) make money by providing this rich data and hence taking their cut from publishers (in many cases they will also act as publishers).

Some might argue that cookie deletion will cause a problem in aggregating the past user histories. I agree that cookie deletion is an issue but all these companies have some way for user to login or provide their real information (gmail, hotmail, yahoo mail, google checkout, toolbars, messengers etc.) which can help them tie all the cookies together. I will blog about this more in my future article.

Another issue raised by this article was privacy. I have written a lot about this in past, here is link to my past post which talks about this issue Behavioral Targeting: Audience Of One.

Behavioral Targeting will become a norm (it already is) and these three giants will own (already do) a significant portion of that user data that will make it possible.

Here are my other articles on Behavioral Targeting

1 comment:

  1. Ian Thomas12:09 AM

    Anil,

    Great post. The deal with aQuantive was about more than just cookies, but you're right (as is ZDNET) to identify that user data are the crown jewels of online advertising nowadays. Yahoo and MSN have relatively rich stores of user data, whilst Google's store is much poorer - hence the DoubleClick deal. One of the things the aQuantive deal should give us is the opportunity to leverage our data more broadly.

    But you're also right to highlight privacy and general 'evilness' (or a lack of it, hopefully) as one of the major hurdles to be overcome. We need to be tremendously respectful of our users' data, and provide a clear set of tools for users to manage and control how their data is used. At the same time we need to work hard to educate users about the benefits of things like Behavioral Targeting, and how giving up a little (anonymous) data can really improve your online experience.

    It's going to be very interesting to see how this all pans out over the next couple of years.

    Ian

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