The Next Scandal in Online Advertising Is…

Harder to do online?

It has been a rough year for online advertising, mostly from two long-standing concerns, both of which seem to be gaining in importance. The first is privacy, the second is viewability. But with other media choices having their own issues, and the field doing well in terms of increased reach via mobile, the tide seems to be turning on the pure numbers. But we are not out of the woods yet, at least to my eyes, because I see a fresh problem on the horizon.

To explain it, I will need to go through a brief history lesson.

In 1977 in the U.S., Congress passed the Community Reinvestment Act. The purpose of the bill was to end the practice of redlining, which was where financial institutions would use maps to discriminate against lenders, primarily in minority areas. Redlining goes beyond cautious lending and straight into discrimination, as it does not take the individual’s qualifications or trustworthiness into account. It also seems like something that the free market would punish, since a redlining institution leaves money on the table, but that is not the point I am trying to make here.

What is intriguing about online marketing and advertising is how even though the technology is new and ever-changing, the challenges are the same as before. Offer, list, creative, in roughly the same ratios as before, for direct. Context, timing and buying cycle, with benefits for cross-channel penetration and frequency. And in the case of remarketing / retargeting, combined with cookie information or device targeting… well, redlining. But this time, it’s more about the individual.

Let’s take this out of the theoretical, so we can make this a little easier to understand.

Two different prospects come to an apparel site that caters to style-forward affluent individuals in the 18 to 25 demographic. The first is highly active on several social media sites, creates content on their own, and is highly active in the category. They also add items to a cart easily, abandon those items often, revisit on mobile, and do not respond to email.

The second prospect comes to the same site for the first time. The visit is out of character or category for the individual, as they usually spend their time on content sites that do not index to the apparel demographic. They are less active in social, spend much more time with email, and do not have the same level of use from mobile.

In the first case, we likely have a dramatically better prospect for lifetime value and referrals – and, in all likelihood, one that is much more sensitive on price. The second is, at best, someone who might use the site periodically for gifting purposes. At worst, we might be in the realm of a fraudulent purchase.

From a business standpoint, it makes sense to float the first profile a better price. In any event, it makes sense to pitch them on a loyalty program, which is a relatively uncontroversial way to offer different pricing levels. But it also makes sense to make the more competitive deal right away.

So far, we are still on the side of defensible business decisions and matching the individual prospect. Nothing too controversial here, unless you are the second prospect, and find out about the practice. 

But it is a very short, very slippery slope into more unseemly areas, where the higher price comes because a brand wants not to reward a higher lifetime value prospect, but to “protect” the brand by having it more likely to appear with desired demographics. The capacity for abuse is, of course, a lot greater with bigger ticket items like financial services, and much easier to disguise, since it is not on an easy to comprehend discrimination level, like a map.

Targeting allows for all of this to happen not in a dark future dystopia, but right now. Public relations risk and the sheer complexity involved in multiple pricing models makes it unlikely, not impossible. There are already recent news stories about how cell phone companies are complicit in the practice, by the way. This isn’t a problem in theory.

Some of these moves may be defensible, both in a court of law and in the court of public opinion… and in all likelihood, it will not be the last that you have heard of it. Especially in an election year, with net neutrality showing as something that activates public interest.

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Speaking of a targeting with a relevant offer, I would like to ask you to like or share this column, connect with me on LinkedIn, email me at davidlmountain at gmail dot com, or hit the RFP box at the top right of the page. The RFPs are always free. Hope to hear from you soon.