Behavioral Targeting: Google Pulls Out the Stops

Alarming privacy advocates, the search giant will use stored browsing histories to trigger ads aimed at selling Web surfers things they seem to want

By Robert D. Hof

Google Chief Executive Eric Schmidt
David Paul Morris/Getty Images

Google has long resisted the emerging but controversial method of showing ads to Web surfers based on the kinds of sites they've previously visited. The company appears to have gotten over its reservations.

On Mar. 11, Google (GOOG) said it will begin to offer ads using what is known as behavioral targeting, which tailors ads to people's interests and online behavior. "We're looking to make ads even more interesting," says Brad Bender, a Google product management director.

To date, Chief Executive Eric Schmidt has eschewed behavioral targeting, citing concerns over its hidden nature. Google's brand of targeting—which it calls interest-based advertising to avoid the negative connotations associated with behavioral targeting—will give users an unusual amount of control over whether and how they're tracked and targeted.

testing for a 2009 rollout

Behavioral targeting, used by sites such as Yahoo (YHOO) and the middlemen known as ad networks that broker advertising to most Web sites, uses electronic markers on people's Web browsers called cookies to track what sites people visit. If someone has visited several car sites, for example, General Motors (GM) might want to target an ad to her as she roams the Internet. Or if someone else placed a cell phone in an Amazon.com (AMZN) shopping cart but didn't buy it, he might be shown an ad for that phone on other sites.

Google's targeting involves placing people—or more accurately, the Web browser on their computer, minus personal information—into one or more of 30 broad categories and 600 subcategories, such as baseball fan or luxury car seeker. In the first couple of weeks of the program, still in test mode, 20 to 50 advertisers approved by Google will run ads, though the program will roll out far more widely later this year.

To help advertisers place ads, Google will cull information from its content network—the thousands of sites where the search giant places text and pictorial display ads related to the content of those pages. The vast network ranges from little-known blogs to such large sites as those for Amazon.com, BusinessWeek, and The New York Times. Google will not use data from users' Google searches to target ads.

the quest to make ads useful

The moves are aimed at helping Google make greater headway in the $8 billion display ad market, where it has less than a 2% share, virtually all that from its YouTube video site. Unlike search ads, which appear next to search results and therefore indicate overt interest in a topic or products, display ads often are not targeted to people's interests. As a result, to advertisers' increasing dismay, they're often ignored. In the coming years the new approach "has real revenue potential" for Google, says Scott Kessler, an analyst at Standard & Poor's, which like BusinessWeek.com is owned by The McGraw-Hill Companies (MHP). "It should also have a favorable impact on profit margins." It's unlikely to have a significant impact on Google's revenue this year, however, Kessler says.