Barack Obama and John McCain are tracking what you do online. The Presidential candidates are so eager for votes this November that their campaign staffs are turning to behavioral targeting, a sophisticated though controversial strategy to pinpoint voters and volunteers online with advertising tailored to their interests. It's the first election in which White House hopefuls are using the approach. "The growth will be substantial this year," says Thomas Gensemer, managing partner at Blue State Digital, a political Web shop working with Obama.
Behavioral targeting gives campaigns a potentially powerful new way to slice up the electorate. In the past, politicians used surveys and demographics to target voters with mailings and local TV ads. But much of the effort was wasted. Campaigns had to assume that individuals shared the values of a large group—say, the National Rifle Assn. or a Zip Code on Chicago's West Side. Now the advertising arms of Yahoo! (YHOO), Microsoft (MSFT), and others help politicians uncover people's interests by tracking their Web surfing and searches. By mixing these profiles with data such as age or gender, they can build thousands of voter profiles, each a target for a customized pitch.
The Obama campaign, at the Democratic convention this past week, wouldn't discuss its strategy. But the nominee is using the technology to woo voters, donors, and volunteers, say sources familiar with the effort. For example, when people visit the volunteer section of the Obama Web site but click away without signing up, the campaign puts a cookie on their Web browser. Then, as surfers move around the Web, the campaign looks for opportunities to bring them back. If they go to a parenting blog, Obama can deliver an ad about education policy. If they read a story on a tech news site, the campaign can serve up something about technology policy.
McCain's campaign says it's working with Yahoo and Google (GOOG) on similar efforts, though it won't share details for competitive reasons. One strategy is to track down military veterans online, on the assumption they're more likely to give votes and money to the Vietnam vet. Once staffers identify these people, they deliver ads with taglines such as "Experience Money Can't Buy."
Such targeting used to be quite crude. But it's gotten better as people spend more time online. AOL (TWX), which recently rolled out behavioral targeting across all its sites and those of 4,000 partners, says it can track 82% of Americans online. It collects around 70 data points per person each month. "The companies—AOL, Google, Yahoo—have gotten really good," says R. Rebecca Donatelli, chairman of Campaign Solutions, the agency running McCain's Internet campaign.
Behavioral targeting is still relatively small, about 3% of total online advertising. But it has become one of the fastest-growing segments as companies and candidates step up their spending. Revenues are expected to rise 48% this year, to $775 million, and hit $4.4 billion in 2012, estimates researcher eMarketer. Darren Beck, vice-president of marketing at LendingTree (IACID), says the mortgage company has continued to use the technology despite the tight real estate market because it's so effective.
Still, as the practice gains prominence, it's stirring privacy concerns. Congress and the Federal Trade Commission held hearings during the past year. In August, Congress initiated a further inquiry, sending letters to 33 companies asking for information on their practices. The industry is responding by adopting new policies, such as deleting search data after a certain time period and not advertising based on certain medical conditions.
Advocates say that as politicians see the potential in online targeting, they may be reluctant to push for more safeguards. "On the one hand, it's great that Congress is concerned about privacy," says Jeffrey Chester, executive director of the nonprofit Center for Digital Democracy. "But they haven't come to terms with the idea that their candidates are doing targeting."
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