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Privacy issues have been the bane of behavioral targeters' existence for awhile now. But how much impact have privacy advocates had on the industry? According to a new study from the Ponemon Institute, marketers now use behavioral targeting 75% less than they would like.

That should be enough to strike fear in the hearts of behavioral targeters. As if there weren't already enough reason to be bearish on the future of BT.

Ponemon surveyed 90 companies and organizations for its study. Most have cut back their behavioral advertising. That is despite the fact that they estimate tracking users online leads to 50% more efficient ads — that generate more sales than conventional display purchases.

Larry Ponemon, chairman of the privacy and security research group, tells The New York Times that marketers are avoiding BT ads because the sector is subject to an uncertain legal and regulatory environment:

“Privacy fears are definitely having an economic impact."

Michael S. Zaneis, vice president for public policy at the Interactive Advertising Bureau, thinks that can change:

“If you can diminish the privacy concerns, money will flow into online behavioral advertising. It would be a lift for the entire industry.”

But that's easier said than done. Self-regulation efforts have stepped up, with new icons meant to inform consumers of where and how their personal information is being used by marketers. Meanwhile, the IAB has been working overtime to inform consumers about how BT ads work. And just yesterday I wrote about a new tool that lets consumers manage the BT ads they see online.

But unless consumers actually start paying attention, none of that matters. And it is incredibly hard for consumers to keep track of everything going on with their data online. Here's how The Times puts it:

"The problem is what economists call “information asymmetry.” In simple terms, on one side of the computer screen is grandma searching for arthritis treatments or a birthday gift for a granddaughter, and on the other side of the screen is a black-belt quant working for a data-mining start-up. The consumer can’t be expected to understand — and follow — all that happens with his or her data, and the clickstreams can closely approximate personally identifiable information."

There have more than a few reasons to think that behavioral targeting won't end up living up to its potential. Regulation is one way it could die — Congress could pass guidelines that make BT completely inefficient. Meanwhile, the growing tendency of consumers to openly share information online could make it obsolete as well. 

But the uphill battle of keeping the public informed about BT could be another. If consumers don't understand what's happening with their information — and maketers fear that will hinder their efforts to reach them — brands will continue to shy away from the practice.

Image: Dan Diemer

Meghan Keane

Published 30 April, 2010 by Meghan Keane

Based in New York, Meghan Keane is US Editor of Econsultancy. You can follow her on Twitter: @keanesian.

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