The double-edged sword of “precision marketing”

Data recently released by PricewaterhouseCoopers and the market research firm Wilkofsky Gruen Associates shows that global online advertising spending is expected to rise from $18 billion in 2004 to $87 billion in 2013, and its share of global advertising is expected to increase from 4 percent to 19 percent, the third largest advertising market. Global spending on TV advertising is expected to take the lion’s share, reaching $168 billion in 2013, with newspaper and magazine advertising in second place at $92 billion.

China’s online advertising market is in a period of rapid growth. According to iResearch data, a marketing research company, China has 460 million Internet users, more than one-third of the world’s total, with an average online time per day of about 2.6 hours. IResearch expects China’s online advertising market to reach 47 billion yuan ($7.6 billion) n 2011.

“Half of my advertising expenditure is wasted, the problem is I do not know which half,” US businessman John Wanamaker said,, summarizing the problem for advertisers.

Compared to traditional advertising, the big advantage of online advertising is accuracy, as tracking technology enables “behavioral targeting advertising”. 

Internet technology makes targeting consumers easier, by recording the user’s online behavior, from shopping choices to their preferences and hobbies, and forming a user “identity”, which enables specific advertisements to be sent to a targeted user.

Currently, Internet advertising companies in China can be divided into two categories: the pure advertising platforms, including Waves Gold and Yi Ma; and brand advertising companies, such as Yoyi, Easy Media, and MediaV. Take Yoyi, for example, the company spent four years growing into a big online advertising company; accumulating a database of 260 million active users. At the same time, it adopted SVM technology, search engine technology, and cloud computing to divide users into 22 industry categories and 230 small categories. Based on these categories, they have leveraged their own advantages in precision advertising. 

However, technology-based precision advertising has some problems. Google was recently embroiled in a row over user-privacy issues. Google collected data about user’s behavior and provided the data to appropriate advertisers. Google categorized the user’s information into 20 industry categories and 600 user identifier categories, such as “car enthusiast” or “fashion fanatic”, so that the advertising companies could deliver precise advertisements. Google’s behavior aroused a great deal of anger from netizens and in the end, Google had to repeatedly clarify that its goal was to collate information so that its search engine would become more accessible and useful.

But advertisers still want more than just web advertising, they want knowledge of online consumer’s behavior.

Translated By Peng Bo. Write to him at pb.bloomberg@gmail.com

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