If it’s December, it must be time for privacy watchdogs to warn you that our products are out to get us. This time it’s toys that are spying on our kids, or cars that may use our travel patterns against us.
I have been covering this story for three decades now, and what’s funny is that the horror privacy advocates want you to fret about is that advertising might become a service.
Which it’s not.
The real story on Internet advertising is not that it knows if you’ve been bad or good. The real story on Internet advertising is that it remains wildly ineffective. It has become the norm only because it’s so very cheap.
Google Wants What Santa’s Got
What Alphabet Inc (NASDAQ:GOOGL), Facebook Inc (NASDAQ:FB) and Verizon Communications Inc. (NYSE:VZ), which bought AOL and Yahoo for their Internet advertising units, really want, and can’t seem to get, is what Santa Claus already has.
Santa, after all, knows if you’ve been naughty or nice. Santa knows just what doll or toy car you want for Christmas, or more likely which video game’s zombies you want to be killing Christmas morning.
Santa knows this because your kids tell him, and the kids’ parents watch them. Santa has a good batting average with these systematic privacy violations, knowing which kids are bad or good and learning what is in their heart of hearts.
Google? Not so much.
When you have just bought something on Amazon.com, Inc. (NASDAQ:AMZN), watch Google’s ads follow you about the Internet offering you the same thing. When I write about Exxon Mobil Corporation (NYSE:XOM), I am certain to be treated like an oil trader, by Internet ads, over the following few hours.
For all the terabytes of data Internet ad companies are getting every day, on your purchases and your browsing history, the fact is that they are terrible at anticipating your needs, at turning ads into a real service. They know where you have been but have no idea where you are going.
So why are advertisers running to these services anyway? Why have such advertising services destroyed the newspaper industry, and why do they threaten TV?
Why Advertisers Google You
It’s because Internet ads are incredibly cheap.
With a newspaper or magazine ad, you paid a premium price to put your message in front of specific types of customers. The same was true with a targeted television buy. Of course I’m ready to get that ceramic-coated copper fry pan, now that I’ve seen its ad on The Cooking Channel. Yes, I want to buy a reverse mortgage from Henry Winkler after seeing him on a Happy Days re-run.
Such extrinsic targeting, ads based on what you’re reading or watching, can be effective. They hit people who might be good prospects. But with intrinsic targeting you can get the same audience for a fraction of the cost. Need to reach 50-something women in wealthy Atlanta zip codes who are likely to own bird feeders? You can do that with Google advertising. You can do that with great precision.
But it doesn’t mean they’ll buy, which is OK because with intrinsic targeting you’re not paying a premium price for that audience, as you would with a newspaper, magazine, or even cable TV ad. Instead, you’re getting the same price every other Google advertiser pays. The targeting is part of the service.
The Dirty Secret
The dirty secret of Internet advertising is that it’s not Santa Claus. For advertisers, there is no Santa Claus. There are only targeted markets, which nearly all ads deliver, and prices, which older media can’t match.
Listening in on your kids, or watching where you have driven, isn’t going to change that, as much as the ad wizards might like it to change. What you just did tells me nothing about what you will do next.
It’s price, not privacy, that sells Internet ads.
Dana Blankenhorn is a financial and technology journalist. His latest novel is Bridget O’Flynn vs. Something Big & Ugly. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.