Wall Street Journal
Behind the scenes of a recent online shopping trip, Blue Kai , a startup company that collects Internet user data, was tracking when a Web surfer browsed for electronics on eBay, searched for cruises and checked out snowboards. It also tracked when a Web surfer researched Chevrolet sport utility vehicles on auto site Autobytel and priced flights to Durham, N.C., at travel site Expedia.
After collecting that kind of information, Blue Kai groups Web visits into categories of consumers. It then immediately auctions off the data from some of the sites to marketers and Internet companies, which in turn use it for consumer research and ad personalization.
The Web companies make money for selling the data about visitors to their sites, and Blue Kai takes a cut. The advertiser gets its coveted targeting.
After collecting that kind of information, Blue Kai groups Web visits into categories of consumers. It then immediately auctions off the data from some of the sites to marketers and Internet companies, which in turn use it for consumer research and ad personalization.
The Web companies make money for selling the data about visitors to their sites, and Blue Kai takes a cut. The advertiser gets its coveted targeting.
While the idea of target marketing has been around a long time, marketers until recently have had a hard time buying on enough Web sites to make the targeting truly effective.
Blue Kai, like data-mining firm eXelate Media and others, are striking deals with thousands of Web sites to collect and sell data on their visitors that will be used for consumer research or ad targeting. Marketers, in turn, are using the information they buy to make better choices when buying ad space. It is a process that's proving especially useful when buying through ad exchanges, which are new systems that allow advertisers to bid directly on the ad space available on a large group of Web sites.
Buying such data would let a hotel chain, for instance, show ads featuring discounts in North Carolina to a person who recently shopped for a flight to Durham—and not just on the travel site, but on any of a number of sites across the Web.
Some Web sites are hesitant to sell data about the consumers visiting them to outside firms. Historically, the only way a marketer could buy ads on a Web site was through striking a deal with that site directly. Now, buying ads based on the data about visitors, rather than the content published on the site, could drastically change how media companies do business.
The data is becoming the most important component for marketers and Web sites. It tells them who their audience is
Refining digital ad buying practices could bring some steam back to the market for online display ads—those with text and pictures that border a Web page—a market estimated at $20.8 billion in 2009, down from $23 billion in 2008, analysts say. U.S. online ad spending on targeted ads will reach $1.1 billion this year, up from $775 million in 2008, according to research firm eMarketer.
"These companies are adding tremendous value to the whole advertising ecosystem," says Ross Sandler, an Internet analyst with RBC Capital Markets.
Tapping such data gives marketers a way to buy ads according to specific groups of consumers who are likeliest to be interested in a given product, says Curt Hecht. Mr. Hecht is president of Vivaki Nerve Center, a unit of Publicis Groupe that buys hundreds of millions of dollars of online ad space a year for companies such as Procter & Gamble and Wal-Mart Stores.
For instance, a credit card company can buy ads targeted to small business owners it knows are in the market for a new card, instead of buying ads on business-related Web sites.
Neither Blue Kai nor eXelate discloses specific Web sites that they buy and sell data from, citing agreements with those Web sites. In their privacy policies, some Web sites reveal that they sell data to third parties, but often do not list the particular company. EBay says in its privacy policy that it works with Blue Kai but doesn't allow the company to collect any personal information about consumers.
Travel sites Expedia and Kayak say they both sell consumer data in Blue Kai's auction, noting that the information is anonymous and not tied to the specific Web site.
The data brokers have different formulas for collecting and selling information on millions of Internet users across thousands of Web sites, from top retail and travel sites to social networks. Blue Kai, a Seattle company launched in September 2008, regularly records information on more than 160 million unique U.S. monthly visitors shopping on retail, travel and auto sites across the Web.
"The data is becoming the most important component for marketers and Web sites. It tells them who their audience is," says Omar Tawakol, chief executive at Blue Kai.
Some lawmakers, concerned about Internet privacy, are preparing legislation to make more transparent Web sites' tactics for collecting information on their users. In an effort to fend off legislation, data brokers say, they abide by industry standards and do not collect any personally identifiable information and sensitive data, such as health information. They also tout efforts to make their business practices more transparent to consumers.
Both Blue Kai and eXelate, for instance, feature sections on their Web sites to show consumers what information the company tracks and giving consumers the option not to be tracked.
Not all Web sites where Blue Kai tracks information sell data to outsiders. Some use the information to personalize their sites for individual users or for their own advertising purposes.
Some publishers fear that their competitors could buy data about the consumers visiting their sites and use it to steal customers.
IAC/InterActive, for instance, is testing the sale of consumer data tied to its e-commerce site Pronto through eXelate. "If we sell that data, it allows another sales team to sell our audience and compete against us," says Greg Stevens, president of IAC Advertising. "But if it is worth millions and millions and millions of dollars, then hey, maybe the paradigm has turned upside down."
"These companies are adding tremendous value to the whole advertising ecosystem," says Ross Sandler, an Internet analyst with RBC Capital Markets.
Tapping such data gives marketers a way to buy ads according to specific groups of consumers who are likeliest to be interested in a given product, says Curt Hecht. Mr. Hecht is president of Vivaki Nerve Center, a unit of Publicis Groupe that buys hundreds of millions of dollars of online ad space a year for companies such as Procter & Gamble and Wal-Mart Stores.
For instance, a credit card company can buy ads targeted to small business owners it knows are in the market for a new card, instead of buying ads on business-related Web sites.
Neither Blue Kai nor eXelate discloses specific Web sites that they buy and sell data from, citing agreements with those Web sites. In their privacy policies, some Web sites reveal that they sell data to third parties, but often do not list the particular company. EBay says in its privacy policy that it works with Blue Kai but doesn't allow the company to collect any personal information about consumers.
Travel sites Expedia and Kayak say they both sell consumer data in Blue Kai's auction, noting that the information is anonymous and not tied to the specific Web site.
The data brokers have different formulas for collecting and selling information on millions of Internet users across thousands of Web sites, from top retail and travel sites to social networks. Blue Kai, a Seattle company launched in September 2008, regularly records information on more than 160 million unique U.S. monthly visitors shopping on retail, travel and auto sites across the Web.
"The data is becoming the most important component for marketers and Web sites. It tells them who their audience is," says Omar Tawakol, chief executive at Blue Kai.
Some lawmakers, concerned about Internet privacy, are preparing legislation to make more transparent Web sites' tactics for collecting information on their users. In an effort to fend off legislation, data brokers say, they abide by industry standards and do not collect any personally identifiable information and sensitive data, such as health information. They also tout efforts to make their business practices more transparent to consumers.
Both Blue Kai and eXelate, for instance, feature sections on their Web sites to show consumers what information the company tracks and giving consumers the option not to be tracked.
Not all Web sites where Blue Kai tracks information sell data to outsiders. Some use the information to personalize their sites for individual users or for their own advertising purposes.
Some publishers fear that their competitors could buy data about the consumers visiting their sites and use it to steal customers.
IAC/InterActive, for instance, is testing the sale of consumer data tied to its e-commerce site Pronto through eXelate. "If we sell that data, it allows another sales team to sell our audience and compete against us," says Greg Stevens, president of IAC Advertising. "But if it is worth millions and millions and millions of dollars, then hey, maybe the paradigm has turned upside down."
