DCLK........The Internet is a powerful medium for targeted advertising. Maybe a little too
powerful?
DoubleClick is watching you
By Zina Moukheiber
3M WANTED TO SELL more of its MP8030 multimedia projectors. This nifty
machine has built-in video and speakers, and users can plug it into their
laptops. But at $10,000 it's not the sort of thing for showing your neighbors
slides of the striped bass you caught.
Potential buyers work in advertising agencies or the data processing
departments of big corporations. How is 3M going to reach this narrow,
highly specialized audience?
3M turned to DoubleClick, Inc., an Internet advertising broker in New York
that targets its ads very, very narrowly. It does that by looking over the
shoulders of people browsing the Web, trying to guess—from their
computer software, their Internet addresses and their reading
habits—what products they might be interested in buying.
So far, the ten-month-old firm has lined up 60 Web sites to participate in
its network, among them the sites for Quicken (the financial software
company), Travelocity, Virtual Comics and Books That Work, a home and
garden software publisher. These Web publishers split ad revenues with
DoubleClick and allow DoubleClick to track who's visiting what site and
how often.
DoubleClick derives these revenues from such advertisers as AT&T,
BankAmerica Corp. and American Airlines. The ad for the fancy projector,
for example, goes to Web fans who apparently work at advertising
agencies or have Unix as their operating system. Unlike the
garden-variety Windows and DOS, Unix tends to be favored by
heavy-duty computer users who just might have the deep pockets for a
high-end projector.
Wait a minute. How does DoubleClick know that you work for an ad
agency? By inspecting your Internet address. DoubleClick matches it
against a database of 70,000 Internet domain names, a database that
includes a line-of-business code.
How does it know you use Unix? By asking your browser program.
Browser software (typically either Netscape's Navigator or Microsoft's
Explorer) routinely communicates basic facts about your hardware and
software configuration to Web-site operators. They need the information
in order to make their Web pages appear on your screen.
Bigger question: How does DoubleClick know who you are? It doesn't,
exactly—it doesn't know your name or street address. But it does create a
dossier on you, attached to an ID number. The first time you log on to any
of the 60 sites in the DoubleClick orbit, the DoubleClick server running
that site assigns you an ID number and stores that number on your
computer.
After that, whenever you visit any of the 60 sites, the DoubleClick server
picks up the ID number and tucks away information about your visit.
Gradually it builds a pretty complete dossier on you—and your spending
and computing habits.
Making all this possible is a device known as a "cookie." A cookie is a file
created at the behest of a Web server and stored on the user's PC. Most
Web sites use cookies to remember a user's preferences, such as what
items have been selected for purchase, or whether or not the user is
reading the page using frames.
However, if the Web site is affiliated with DoubleClick, the cookie also
contains the ID used to create user profiles. All very innocuous, insists
Kevin O'Connor, the 35-year-old chairman and cofounder of DoubleClick.
But he admits that visitors to these sites probably don't know they are
being watched and studied. Their browser software may warn them that
a cookie is being created, but nowhere is it divulged what the purpose of
the ID number is.
Is this kosher? Should Web sites be keeping profiles of their visitors? "We
are very concerned about sites that don't inform users. It's important that
people know what's being collected and for what purpose," says Lori
Fena, executive director of the Electronic Frontier Foundation, an
advocacy group for electronic privacy rights.
But the outrage may be overdone. In a way this profiling differs only in
degree from what advertisers have been doing for years. If you want to
sell surround sound systems, you select readers who like to read about
high-fidelity stereo equipment. You do that by advertising in Stereo
Review magazine.
DoubleClick could eventually take this a step further. For example, by
cross-matching visitors to an opera page with visitors to a hi-fi page, it
could create the perfect audience for an advertisement pitching a
surround sound CD of The Magic Flute.
DoubleClick doesn't yet have any advertisers buying cross-matched
readers. But here's another way to get mileage out of the computer:
Count how many times a reader has seen an ad. DoubleClick filters out
the 3M banner for Web users who have seen it three times without
clicking on it. "After the third time, you're wasting your money," says
O'Connor. "It's banner burnout."
Again, this is not very different from what a mail-order merchant does if
he removes you from his list after you fail to order a certain number of
times.
A Web-site operator could design a cookie that would snoop through a
user's hard drive, looking for a Social Security number or a bank
balance.
So far, pretty innocuous. If technology can screen out unwanted ads,
it's a boon to the consuming public as well as to the merchant. (Would
that your telephone and mailbox had such screens.)
What makes cookies truly controversial is that the same technology could
be made far more intrusive. If a Web-site operator were so inclined, he
could design a cookie that would snoop through a user's hard drive,
looking for something that resembles a Social Security number or a bank
balance. It may take only a few bad apples to spook Internet users about
all on-line advertising.
For now, the advertisers are pleased. Seth Goldstein, president of Site
Specific, the Internet ad agency that handles the 3M account, says the
click rate on the 3M banners is about 7%, compared with the Web's 3%
average. More than 1,900 people have expressed an interest in the
projector by clicking on the ad banner. The cost per lead came to $66.
Goldstein compares it to $135 for magazines and $20 for direct mail.
DoubleClick is O'Connor's second company. An electrical engineering
graduate from the University of Michigan, he created software that
allowed PCs to dial remotely into local area networks and caught the PC
boom in 1983.
He sold his Intercomputer Communications Corp. for $25 million to a firm
that is now part of Attachmate, a privately held network products
company.
In 1995 O'Connor was ready to strike out again. This time, it was the
Internet that was taking off. Having discovered the ad business by
investing in a small medical publisher, O'Connor knew all about
measuring audiences and cost-per-thousand. He also knew that the
interactive computer would finally answer advertisers' age-old questions
about who was seeing their ads and how they were reacting to them.
O'Connor put up $150,000 of his own money and raised over $2 million
from the privately held ad agency Bozell, Jacobs, Kenyon & Eckhardt.
He enlisted the help of Dwight Merriman, a 28-year-old computer science
graduate from Miami University in Ohio, who helped him make a quick
success of the Intercomputer Communications venture.
While O'Connor drummed up interest from advertisers, Merriman led a
team of seven who cranked out a million lines of C++ code in just over a
year.
By tracking people's Web behavior, Internet addresses, operating
systems, browsers and Internet service providers, DoubleClick has
amassed profiles on 10 million anonymous Web visitors. The still-private
DoubleClick is not yet profitable, but O'Connor claims it has already taken
in around $10 million in revenue.
Whatever this database is worth now, it would be worth a lot more if it
had names, addresses and telephone numbers attached. Does O'Connor
swear off ever gathering such data?
"If we do that, it would be voluntary on the user's part, and used in strict
confidence," says O'Connor. "We are not going to trick people or match
information from other sources."
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