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Has Online Targeted Advertising Gone Too Far?

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Google AdSense, targeted Facebook advertising and promoted Tweets allow business owners to create customized and narrowly targeted digital advertising that appeals directly to their choice demographic. However, it soon may be time to pay the piper, an Oregon State University professor warns.

The recent data breach of marketing firm Epsilon, which resulted in the theft of millions of names and email addresses, is calling into serious question how far online marketers have gone in collecting customer data and profiling customers for targeted advertising.

“Online behavioral advertising offers the highest return on investment for dollars spent on e-advertising – a value that is only diminished by the controversial nature of the tracking technology that is used to produce the high returns,” said Nancy King, a professor at the College of Business at Oregon State University.

King points out that marketers have long created market segments in an effort to create more relevant advertising and efficiently spend their advertising dollars. What has changed in recent years is that in the online world of e-commerce, tracking technologies allow advertisers to construct personal profiles and use them to individually target consumers much more effectively than ever before.

While consumers do, to some extent, benefit from third parties generating a personal profile in that they are more likely to receive only targeted advertising that might be of genuine interest, most consumers, given the choice, would prefer that their personal preferences regarding coffee brands, credit cards and textured tissue paper were not made available to the entire marketing industry, King said.

“Profile-driven advertising exploits the consumer's interests and purchases)) in one area to sell them goods and services from another,” she added. “Most consumers would prefer that not to happen.”

King said that while there are technological tools available to respond to this issue — such as ad-blocking software and anti-tracking tools for the Web browser — most consumers are unaware of the existence or need for these tools.

The latest data breach (and the many before it) is forcing businesses and government to consider creating more stringent privacy policies for both advertisers and third-party businesses that support the industry by tracking and managing consumer data, King said.

“A key concern is data-sharing among these third parties and the unlikelihood that consumers are aware of how their data is used by third parties with which they do not directly interact — essentially a failure of transparency," she said.

King's research appears in the latest issue of the International Journal of Private Law.

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