Personalized Video Ads

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Personalized Video Ads

There has been a long-running love-hate relationship between American consumers and advertisers. On the one hand, people love to turn off commercials and complain about ads. On the other hand, they also love to learn about new products that suit them. Then they rush out and buy them, thereby motivating the advertisers to create more ads to complain about.

If there seems to be a disconnect here, the problem is simple to understand: Because of the nature of traditional media outlets, there has never been a clear way to know which consumers are interested in which ads. That led to the strategy of mass advertising: simply blanketing the landscape — whether on TV, radio, billboards, or magazine pages — with the same message, generalized for nearly everyone. But a message generalized for everyone is often a message optimized for no one. Like the art that hangs on a motel room wall, it represents the lowest common denominator. It may not offend anyone, but it doesn’t delight anyone, either.

The failures of mass marketing campaigns led to the development of “targeted advertising,” in which a company seeks to define a specific market segment — by location or by age, for example. The vendor would exhaustively research each segment to find out what its members wanted, on average, as well as what they considered relevant and what they might find offensive. Ads were then created for that presumably narrow band of the population. Over the years, more and more refinements have been made to this method, including surveys and focus groups. Many companies even pay customers to tell them what they want, what they like, and what they dislike.

But the technologies of communications and entertainment have changed radically in the last 20 years, opening new pathways for advertising messages and new ways to shape them. In fact, as reported recently in the Wall Street Journal,1 we stand on the brink of a revolution in advertising in which messages will be targeted not just at demographic groups or geographic locations, but at individuals as well.

One step toward that revolution was taken last summer, when AOL bought a company called Tacoda, which creates what are known as behavioral-targeting ads. Tacoda does an analysis of the way consumers migrate from site to site on the Internet. It also analyzes what products people buy. It then places ads for the appropriate types of products on the sites where those consumers are most likely to visit.

The concept isn’t new, but it was impractical until Tacoda, and its main competitor, Revenue Science, devised a method of aggregating Web sites...

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