Virtually every player in the Web advertising business is sitting on a big database of personal data. Those databases contain the demographic, preference, and social data of millions and millions of Web consumers, and those databases are growing larger and larger all the time. Those databases have also become hyperconnected; that is, various players in the ad delivery chain can share the personal data in those databases in just milliseconds.
In the Web's early days, advertisers were content to place ads in front of people they knew little about in hopes that two or three in 100 would click on them. That "blind" ad-serving model is giving way to "smart" ad serving, where advertisers and their agencies work with intermediaries, and a lot of targeting data, to place ads in front of users likely to click on them.
They judge that likelihood by identifying a person visiting a website, and then evaluating the person's profile in a database, which might contain the person's browsing history, online buying habits, demographics, and even the likes and dislikes of their Facebook friends. After the target prospect has been identified, advertisers want to use the data in an effort to serve up a highly personalized ad to the target.
In short, advertisers are moving away from buying clicks, and toward buying "audiences," instead. The audiences are defined by commonalities in their personal data, gathered from many different sources, both online and off.
"[A]n arms race [is] going on in the data economy right now," says Shane Green, CEO of Personal.com, which offers a personal data management tool for consumers. "Everybody is working hard to find differentiated data, and differentiated analytics."
The quality and variety of what's in those databases makes all the difference in the success of an advertising campaign. "The companies that are able to use their data to best identify and serve ads to site visitors in real time will win," one advertising executive who chose to remain anonymous told me.
Real-Time Ad Targeting
Here is a radically simplified explanation of how an advertiser would place an advertisement on a website today:
When someone visits a website, that site has an opportunity to deliver a targeted ad on behalf of one or more of its advertisers. To do this in real time, the website posts the availability of an advertising opportunity on an "exchange"--a Web-based open market where advertisers can bid to deliver targeted ads.