Don’t label me. Don’t fence me in. Don’t pre-judge, pre-classify, or presume you know me — ’cause you don’t.

Feelings like these are common and appreciable. We humans are incredibly complex, and proud of it. We are fiercely proud of our independence, not in the political sense, but in the mental sense. We want to believe that we consider each of our actions in its totality before proceeding, and that, therefore, you just never know what we’re going to do next.

Those desires notwithstanding, the reality is obviously fairly different. A couple of months ago, I wrote a post called Are you as unique as you think?, postulating that you aren’t. To quote myself :

…if we were truly unique and truly unpredictable; if our actions were in no way interconnected and in no way integrated; if we didn’t have some means of anticipating, to some degree, the behavior of others’ our lives would be ruined.

You wouldn’t have any idea whether your co-workers would show up or whether your spouse would be waiting at home. Events that require critical mass, like rock concerts and political movements, would be impossible. And none of the products that tap into the short head of the marketplace would exist.

In order to function, the complexity of our lives requires repetition, patterns, and short cuts. If we had to make a truly individualized decision for every action we take, we would become paralyzed. If we tried to assimilate all of the data available to us at any given moment, we would go insane.

Predictability. Categorization. Patterns. These are the tools that allow us to function in an incredibly complicated and complex world, and they apply in every situation we encounter. My fellow Search Insider Gord Hotchkiss talked about this (in a much more scientific manner) last week:

When we’re engaged in a mental task, any mental task, our brain is constantly looking for cognitive shortcuts to lessen the workload required. Most of these short cuts involve limbic structures at the sub cortical level, including the basal ganglia, hippocampus, thalamus and nucleus accumbens. This is a good thing, as these structures have been honed through successful generations to simplify even the most complicated tasks. They?re the reason driving is much easier for you now than it was the first time you climbed behind the wheel.

Just as categorizations and pre-processing make our lives bearable, other people’s lives become more bearable when they can categorize us.

And this is the tricky bit. This is where people’s backs start to get up. Just think about it, though. If you want to predict people’s behavior — such as, for example, whether an employee will be skillful or whether a spouse will be faithful — you have to accept that other people will be predicting yours. And the way to do that is through a combination of categorizations, patterns, and belief systems.

Businesses operate under the same framework, only in business it’s not called categorization, it’s called segmentation. When businesses segment customers and markets, they can offer more relevant products and services, more efficient pricing, and more appropriate value.

Just as critical, they can also identify who ISN’T their customer, and avoid wasting either that person’s or their own time.

As with anything, it’s important to find the right balance. Will knowing what kind of underwear you buy help a company sell you a more appropriate cellphone? Probably not, and the cost of the invasion of privacy would likely outweigh any benefits from the information. On the other hand, knowing your history of cellphone usage would definitely help a new service provider steer you to the right plan.

So the trick lies in finding the sweet spot between segmentation and presumption, in making useful categorizations that allow for these benefits to consumers and suppliers without crossing the line into creepiness.

In my next post, I’ll describe these benefits in a bit more detail, using the insurance industry as an example. In the meantime, what do you think about customer segmentation?

Come on, guys. This is so basic and fundamental that it shouldn’t even bear repeating.

Unfortunately, based on two articles that came across my desk this week, it does.

The first was based on a piece of research from my alma mater, Cornell, entitled The Importance of Management Integrity in a Multicultural Workplace. Tony Simons, Ray Friedman, Leigh Anne Liu, and Judi McLean Parks (all Ph.D.s) endeavored to make the point that it is especially important for managers to behave with integrity around their African American employees. These African Americans, they say, with their history of being lied to and treated unfairly, are especially sensitive to incongruities between their managers’ words and actions.

I cannot tell you how disappointed I was to read this.

Is this what integrity has become? A means to an end, one that should be exploited to various degrees in order to match the sensitivities of various ethnic groups?

It is especially important for managers to behave with integrity, period. Nobody should be encouraged to get away with a lack of integrity because their all-white staff wouldn’t notice anyway.

The paper does point out some of the broader benefits of behaving with integrity:

…senior managers’ integrity trickles down to affect behavior and attitudes throughout the organization. These results suggest a need for executive training and vigilance focused on the issue of behavioral integrity, because managers’ integrity affects the attitudes, conduct, and loyalty of all employees.

Even these broad benefits, though, keep the focus external: behave with integrity because you’ll get some managerial goodies. And that’s okay; sometimes you have to start with rewards to drive positive behavior. Even if McDonald’s is only offering salads to keep the dollars flowing (rather than as a reflection of some genuine corporate nutritional focus), at least they’re offering salads.

In the long run, however, the external rewards have to be supplanted by something deeper. If not, the outward behavior will disappear in favor of the next hot trend.

Right now the study says integrity affects the attitudes, conduct and loyalty of all employees. What if a new study says the number one thing that drives loyalty is actually stock options that have yet to vest? Does that mean everyone should abandon integral behavior and start handing out shares?

Integrity, like character, is what you do when you think no one is looking. Behave with integrity because it’s the Right Thing To Do, not because it’s the Management Flavor of the Week.

Which brings me to the second article, this one from the San Francisco Chronicle entitled Tarnished Tech Firms to Adopt Code of Conduct.

This one describes a standard of behavior, to be published next week, being adopted by Yahoo, Google and Microsoft. It comes out of the backlash from US companies agreeing to the demands of repressive host countries — remember when Yahoo turned over the identities of Chinese dissidents to the authorities and said dissidents got thrown in jail? So this code is a set of voluntary guidelines for how these companies will behave when they’re doing business in repressive countries.

I have no intention of getting into any sort of political debate here about the merits of doing business in some countries over others, and I certainly don’t advocate any sort of regime-based finger-pointing. But Wendy Davis, whose Daily Online Examiner article led me to the Chronicle in the first place, made a point that I think bears repeating:

…if Yahoo and other U.S. businesses want to protect their users, they’re going to have to consider flat-out defying foreign governments. Yes, it’s possible that this course of action could result in companies shuttering abroad. Even so, there’s a long-term benefit to standing up for human rights.

Please forget for a moment what you know or think you know about this particular issue, and think instead about the broader implications of what Wendy is saying. Apply it to any issue. Sometimes you have to do what you believe is right even if you don’t stand to benefit.

In these days of cynicism, it’s easy to think that nobody has integrity anymore. But as whoever wrote Desiderata pointed out, “with all its sham, drudgery and broken dreams; it is still a beautiful world.” So be cheerful, and behave with integrity even if nobody’s looking.

Do you think integrity is possible in this day and age?

In my last post, I wrote about what I perceive to be the fundamental problem with behavioral targeting: the value proposition to consumers is less than the cost to consumers.

The post received highly thoughtful comments from Pete and Jim. Both of these people are from anti-Phorm websites (as you’ll see if you click through), and both of them have interesting perspectives on the behavioral targeting problem. I thought I’d aggregate them here and add my spin. So, without further ado, I present my Three Behavioral Targeting Keys to Success.

BT Key to Success #1: Data about an interaction with one supplier, taken without consent, should not be used to promote a new interaction with a different supplier
Trust me, when I explain this one it’s going to be more than obvious.

Imagine for a moment that you go to a Target store. As you’re walking through the store picking out goodies (including, let’s say, diapers), a fellow shopper is surreptitiously observing what you buy. As soon as you pay, that so-called ‘fellow shopper’ ditches her bogus shopping cart, runs outside, and calls Walmart to give them a full report. Walmart then sends you coupons for baby food.

This scenario sounds lousy. But the idea of ISP-based behavioral targeting is even worse, because there’s no existing trust relationship with that phony fellow shopper, while there is one with your ISP. Imagine if the post office read your mail, found out which books you bought from Amazon and how much you paid for them, and then sold that information to Barnes & Noble.

BT Key to Success #2: Recognize that certain ’safe havens’ of communication have to exist for a healthy society
Facebook got a taste of this with the backlash from its Beacon advertising system. People became enraged at the idea that they couldn’t control which activities were kept private.

In that case, the ramifications were generally small — a wife found out too soon about a surprise gift from her husband. In other cases, though, the ramifications may be quite large, manifesting not only in tangible repercussions (consider political communications in repressive countries), but also in a diminished sense of stability and security in society at large.

BT Key to Success #3: Make sure that consumers not only want what you’re offering, but have a clear and transparent choice to accept or reject it
Jim pointed out that Google’s model is easily controlled by the user, as contrasted with ISP-based behavioral targeting:

You don’t want to be tracked by google? Fine, block google’s cookies. Don’t want google to profile your e-mail? Don’t use Gmail. Don’t want them recording your searches? Use a different search engine. You don’t have that kind of assurance when companies start intercepting all your traffic. They take control, not you. You have to rely on their promises to behave fairly, to honour your preferences and you have *no way to make sure they’re doing it*. This makes users uneasy. They feel as though they can’t trust their service providers, something I have to say most service providers have brought upon themselves through years of silly money-grabbing schemes like this and generally deplorable levels of customer care.

In fairness, Phorm is now opt-in only, although I’m not certain how thoroughly they explain what they do at time of opt-in. My understanding is that their technology is presented as protection from phishing sites, which it may well do in addition to its other uses.

Further, you could also make the argument that, just as you could choose to not use Google or Gmail, you could also choose to use a different ISP. This one is a bit trickier, however, and brings some other considerations into play. If ISP-based behavioral targeting were to become the de facto standard, choosing a different one wouldn’t make a difference. And, ultimately, the issue is one of invasion of sensitive information.

When professional service providers gain access to sensitive areas of your life, it is encumbent upon them to behave with corresponding sensitivity. You don’t want your mammogram tech telling you you’ve got nice tits. The privilege of access to sensitive areas of our lives carries with it the responsibility of appropriateness.

Okay, enough for today… I hope I’ve given you some food for thought! That’s what your comments always do for me; I welcome them below.

Last week, I summarized the current sorry state of the behavioral targeting industry. Adzilla in the chilla. NebuAd looking sad. Phorm facing scorn.

Okay, Eminem I’m not.

Nonetheless, I think there is a fundamental problem in the behavioral targeting industry, a problem that is being reflected across all of these companies and the problems they’re facing:

The cost to the consumer is greater than the value proposition for the consumer.

The FUNDAMENTAL premise of these companies is that they improve ad relevance. That’s fine and dandy — I’d rather see an ad for rock climbing gear than one for men’s hair dye.

On the other hand, it doesn’t really cost me anything to see the men’s hair dye ad. In fact, you could make the argument that I benefit more, because I don’t spend money on climbing gear that I want but don’t need. (This is of course in an alternate universe where it isn’t our patriotic duty to buy as much stuff as we can.)

OK, so there are arguments for relevant ads and arguments against them. Either way, it’s not a big pain point for individuals. Irrelevant search results? Big pain point. Irrelevant ads? Ho-hum.

Ad relevance is, however, a big pain point for the companies creating, paying for, and publishing those ads. Clearly, if the ads aren’t relevant, people don’t click on them. If people don’t click on them, none of the entities in that chain get paid. That’s a problem.

So behavioral targeting provides a solution that offers a powerful benefit to advertisers and publishers, but only a so-so benefit to consumers.

Unfortunately, in order to deliver their solution, the consumers have to pay almost as much as the advertisers and publishers, albeit in a different currency. Advertisers and publishers pay with dollars; consumers pay with data. In our attention economy, the data may even be worth more than the cash.

So advertisers and publishers have to pay cash for a powerful benefit they really want, while consumers have to pay data for a so-so benefit they aren’t exactly clamoring for.

In addition, under the model of these ‘traditional’ BT companies, it is impossible for them to provide advertisers a powerful-benefit-for-cash unless consumers go for the so-so-benefit-for-data.

This means that companies have come up with all sorts of creative ways to push the so-so benefit, or, at times, making an end run around the problem by not telling customers about the exchange. Phorm tried exactly this tactic in its initial trials, but has since capitulated to government pressure and now has an opt-in system.

So that’s the core of the problem: the moneymaking value proposition businesses’ll pay for relies on a non-moneymaking transaction with consumers who don’t want it.

What is the solution? It’s elementary, my dear: get back to basics and put the user first.

• What do web users care about?
• What are you offering them?
• Do they value what they’re getting as much as they value what you’re asking from them?
• What don’t they like about what you’re offering?
• What don’t they like about what you’re asking them to pay?
• How can you change what you’re offering, what you’re asking them to pay, or both, so that you’re creating value for the consumer?

Forget about maintaining surfing history, whether it’s anonymized or not. Forget about dangling the dubious carrot of ‘more relevant ads’.

Worry about what the consumer wants, and what the consumer doesn’t want — then worry about pleasing your advertisers.

What do you think about this idea?

The ISP-based behavioral targeting industry is about as shaky as the Dow Jones Industrial Average these days. While UK-based Phorm has been making some headway, it’s still fighting a significant battle of public opinion, while US companies like NebuAd and Adzilla are waving the white flag of surrender.

If you’re just joining us, these are companies that partner with ISPs to track user behavior across the entire Internet in order to offer more targeted advertising.

The last time I wrote about these guys, it was to point out how much better Phorm was doing than NebuAd. Subsequent events seemed to support that observation; on October 1st, Wendy Davis reported that Phorm was going to expand into other countries including the US. Despite the company’s ambitious plans, Wendy was clear about the potential negatives of their ISP-based system:

ISP-based behavioral targeting has been criticized by privacy advocates, who are wary of the practice because ISPs have access to users? entire clickstream data. But Web publishers also have reason to be wary of ISP-based targeting. If Phorm?s platform works as intended, the company will be able to harvest data from publishers without paying them for the information.

For instance, if a user searches for iPods on Google, Phorm can arrange to send that user an ad for a portable music player later, when the user is on some other site. While that site that served the ad would be a Phorm partner, and would presumably be able to charge a higher CPM for the targeted ad, it?s hard to see what Google would get out of the transaction.

In fact, it wouldn?t be surprising if Google ? or other publishers that serve as involuntary sources of data ? finds some way to challenge this type of targeting.

There are a couple of other things to add to the privacy advocates and the no-you-can’t-use-my-data publishers. One is the public attitude. Evangelists are always out there fighting tooth and nail for data portability and other things of disinterest to the general population, but will the public care about these systems? Will they vote with their behavior and their wallets?

For example, Wendy’s article drew a comment from Paula Lynn:

It is a horrible, stalked feeling when this happens. Big brother is closer than you think. And no, people do not usually think for themselves when someone else will do it for them. There are a zillion examples of mind bending influence peddlers who are posing to sell you more than shampoo. Caveat emptor.

The question is, does Paula represent the privacy extreme or mainstream? Because the mainstream are the people who will determine if this technology has any legs.

The other big issue is government regulation, one of the key factors in the downfalls of NebuAd and AdZilla. In fact, it wasn’t even regulation; it was the threat of regulation that made them suffer so. And just yesterday, Wendy published an update that shows Phorm is starting to face similar pressure across the pond:

In the latest development, the European Commission’s Information, Society and Media division, headed by Viviane Reding, last week sent a second letter questioning U.K. authorities about Phorm. “The European Commission takes data privacy of citizens very seriously and therefore is asking the UK authorities to ensure that they fully comply with their obligations under EU law,” according to Martin Selmayr, spokesperson for Reding’s office, in an e-mail to Online Media Daily. The Commission asked the U.K. officials to explain how they “have protected the privacy of U.K. citizens with regard to Phorm in the past, and how they intend to do so in the future,” Selmayr stated. The regulators requested an answer within one month.

So, to summarize:

• Privacy.
• Proprietary data.
• Creepiness factor.
• Government regulation.

Looks like the currently-accepted-as-standard behavioral targeting model doesn’t stand a chance.

So what is at the core of the problem, and what is the solution? Tune in to my next post for my opinion. In the meantime, feel free to share yours in the comments.

Just imagine the risks of Gmail’s new Mail Goggles feature!

High Math Incapacitation Tolerance with a low Stupid-Email Tolerance:

Or a low Math Incapacitation Tolerance with a high Stupid-Email Tolerance:

We hope you enjoyed this brief comedic interruption… and thanks to Sharon Blance and BitStrips for assistance with the artwork!