(Mark Shannon, 2021)
Have you ever spent a few minutes passionately discussing something you are enthusiastic about, like coffee with your friend or family, only to go on your phone and find myriad advertisements about coffee, coincidentally? Some people believe that this is their phone consciously listening to their conversations, making them paranoid about their most treasured tech item's effect on privacy. However, what truly occurred behind the scenes is the modern-day phenomenon of “behavioral advertising.”
What is Behavioral Advertising and How Does It Work?
Behavioral Advertising (aka. OBA online behavioral advertising) is a branch of online-based advertisement that incorporates a user’s online “behaviors” such as search queries, apps downloaded, screen time, etc. Together, these allow advertisers to push highly relevant ads that cohere with the user’s personalized online likings (Mialki, S., 2024). Note that many users would probably start questioning the fabric of their online privacy from the definition alone.
The three core processes involved in behavioral advertising include Data collection analysis, Segmentation, and Application.
Data collection and analysis are the first steps of OBA. Users who are interested in a specific topic will perform certain actions online that correlate with and show their interest. Upon visiting an array of websites, “cookies” from the websites will be used to track the user’s interface and transferred to Data Management Platforms (DMPs) to store the behavior data. (iabuk, 2010)
After this initial step, segmentation happens, where users are separated digitally into different groups for OBA. This generalization of users simplifies the OBA process for publishers and advertisers as they can push ads to groups rather than focusing on individuals.
The application of the data is when the magic happens. Users will often receive personalized ads that suit their interests, oblivious to the intricate process behind the advertisements that allow them to be “personalized.” (Mialki, S., 2024)
Economic Dynamics of Behavioral Advertising
(companiesmarketcap.com, 2022)
With targeted adverts floating around, it would be natural to assume that OBA has positively impacted companies’ revenues. Take for example the revenue of Facebook. Most of Facebook’s (now Meta) revenue comes from advertisement platforms in their software like the Facebook App. Since 2015 when significantly more advertisers started tapping into OBA which led to drastic rise in Facebook’s annual revenue. There was a geometric trend between 2015 and 2021 for Facebooks’ annual revenue which with the idea that a portion of the profit gained from the Advertisement is shared with Meta itself, shows how effective OBA is in ameliorating a company’s economic status.
Apart from this, it has also been proved that a website that fails to implement OBA often suffer from decreased advertisement revenues. Although targeted advertisements are more expensive than non-targeted advertising, the return of it is much more substantial (Ayse Bengi Ozcelik and Kaan Varnali, 2018).
Privacy Concerns: Behavioral V.S. Contextual Advertising
In the figure above where the revenue of Meta is displayed, we can see that in 2021, Meta’s revenue came to an abrupt halt. Although this is when COVID 19 was prevalent and the world’s economy was grasping its wrath, online businesses bloomed, which contradicts Meta’s revenue trajectory during this time.
The truth was, increased online usage had brought attention to potential privacy concerns surrounding OBA, which prompted Apple, a key associate with Meta’s revenue, to release a new iOS update which tanked Meta’s revenue.
In iOS 14.5, Apple delved deep into online privacy and allowed users to fully control whether they feel safe being tracked online or not. Apps can no longer record your actions and operate OBA if you don’t allow them too, or even take a peek into your purchasing history to push more related ads (Apple (Hong Kong), 2024). This already decapitated a huge portion of Meta’s advertisement revenues, and this became worse when a few months later, Google did the same for android.
While OBA does require software to track what a user does on their device, this information is generally not disclosed to companies. It is often relayed to the DMPs anonymously, only via an identification string of symbols. Therefore OBA is not particularly formidable to one’s online privacy. Nonetheless, Apple’s and, later, Google’s choice to enable tracking transparency and bring awareness to it was both an economic and PR calamity for Meta and other advertisers alike.
Works Cited
Apple (Hong Kong). (2024). Privacy - Control. [online] Available at: https://www.apple.com/hk/en/privacy/control/ [Accessed 7 Oct. 2024].
Ayse Bengi Ozcelik and Kaan Varnali. (2018). Effectiveness of online behavioral targeting: A psychological perspective. Electronic Commerce Research and Applications, [online] 33, pp.100819–100819. doi:https://doi.org/10.1016/j.elerap.2018.11.006.
Companiesmarketcap.com. (2022). Meta (Facebook) (FB) - Revenue. [online] Available at: https://companiesmarketcap.com/facebook/revenue/ [Accessed 7 Oct. 2024].
iabuk (2010). What is behavioural advertising? YouTube. Available at: https://www.youtube.com/watch?v=UzOGdtV-_4w [Accessed 7 Oct. 2024].
Mark Shannon (2021). Embracing Contextual vs. Behavioural Targeting | StackAdapt. [online] Resources. Available at: https://www.stackadapt.com/resources/blog/behavioural-vs-contextual/ [Accessed 7 Oct. 2024].
Mialki, S. (2020). Defining Behavioral Advertising: What Is It & What Are the Pros & Cons? [online] Instapage. Available at: https://instapage.com/blog/behavioral-advertising/ [Accessed 7 Oct. 2024].
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