Contextual vs. Behavioral Advertising

In his New York Times op-ed entitled What if We All Just Sold Non-Creepy Advertising? Gabriel Weinberg, founder and CEO of DuckDuckGo (Jack Dorsey's and my default search engine), draws a clear distinction between the two types of Web advertising:

There is no reason to fear that sites cannot still make money with advertising. That’s because there are already two kinds of highly profitable online ads: contextual ads, based on the content being shown on screen, and behavioral ads, based on personal data collected about the person viewing the ad. Behavioral ads work by tracking your online behavior and compiling a profile about you using your internet activities (and even your offline activities in some cases) to send you targeted ads.

He argues that the creepiness of behavioral ads isn't necessary for sites to make money from ads. Below the fold I look at the evidence that Weinberg is right.

DuckDuckGo Traffic

As Weinberg explains, DuckDuckGo uses contextual ads:

This keyword-based advertising is our primary business model. When you search on DuckDuckGo, we can show you an ad based on the keywords you type in. That’s it. And it works. Our privacy policy, in a nutshell, is to not collect or share any personal information at all. Every time you search on DuckDuckGo it is as if you were there for the first time – anonymous.

DuckDuckGo has been in business since 2008, with traffic increasing exponentially (albeit from a much lower base than Google's). Recent estimates are that Google processes around 70K queries per second, and DuckDuckGo averages a bit over 1% of that. A small but growing market share.

There is more recent evidence in Timothy B. Lee's Why some experts are skeptical of Google’s new Web privacy strategy:

Google's post was blasted by a pair of Princeton computer scientists who have long advocated for stricter browser privacy protections. ...

The researchers disputed Google's claim that nuking tracking cookies would undermine the economic foundation of the online advertising industry. They point out that after the EU adopted the General Data Protection Regulation, the New York Times discontinued its use of tracking cookies in Europe. The Grey Lady shifted to using contextual and geographic ad targeting—and its ad revenue hasn't suffered as a result.

In It Isn't About The Technology I quoted from Natasha Lomas' The case against behavioral advertising is stacking up, based on research by Carnegie Mellon University professor of IT and public policy, Alessandro Acquisti, which showed that:

behaviourally targeted advertising had increased the publisher’s revenue but only marginally. At the same time they found that marketers were having to pay orders of magnitude more to buy these targeted ads, despite the minuscule additional revenue they generated for the publisher.

“What we found was that, yes, advertising with cookies — so targeted advertising — did increase revenues — but by a tiny amount. Four per cent. In absolute terms the increase in revenues was $0.000008 per advertisment,” Acquisti told the hearing. “Simultaneously we were running a study, as merchants, buying ads with a different degree of targeting. And we found that for the merchants sometimes buying targeted ads over untargeted ads can be 500% times as expensive.”

Weinberg points to other evidence that behavioral ads aren't worth the extra cost:

This shift back to contextual advertising need not reduce profitability. A recent poll by Digiday of publishing executives found that 45 percent of them saw no significant benefit from behavioral ads, and 23 percent said they actually caused a decline in revenue.
What about compliance costs? Companies are quickly realizing that good privacy practices are a boon for business. People increasingly want to reduce their digital footprint and so choose companies that help them do so. Companies with good privacy practices in their DNA do not face significant compliance costs.

And that Google's search engine doesn't use them:

When you enter a search request in Google, it displays ads that are relevant to that particular search, without needing to collect information about your search, location, purchase or browsing history. However, Google still collects all this information because it also powers non-search behavioral ads across the whole internet, on more than two million websites and apps that use Google’s ad services and on Google’s non-search properties, such as YouTube.

So Google's data collection creates a "premium" product that they can sell to marketers who don't believe the research showing that it isn't worth buying. As I wrote in Advertising Is A Bubble:

The surveillance economy, and thus the stratospheric valuations of:

Facebook and Alphabet (Google’s parent), which rely on advertising for, respectively, 97% and 88% of their sales.

depend on the idea that targeted advertising, exploiting as much personal information about users as possible, results in enough increased sales to justify its cost.This is despite the fact the both experimental research and the experience of major publishers and advertisers show the opposite. Now, The new dot com bubble is here: it’s called online advertising by Jesse Frederik and Maurits Martijn provides an explanation for this disconnect.

Frederik and Martijn's article is a must-read, full of pithy quotes such as:

Marketers are often most successful at marketing their own marketing.

Later in the same post I pointed out that:

The fact that targeting doesn't work shouldn't be a surprise to any Web user. Two universal experiences:

• I buy something on Amazon. For days afterwards, many of the ads that make it past my ad blockers are for the thing I just bought.
• For weeks now, about half the videos I watch on YouTube start by showing me exactly the same ad for Shen Yun. Every time I see it I click "skip ad", so YouTube should have been able after all this time to figure out that I'm not interested and show me a different ad.

But note that the ad platforms don't care. They can't be bothered to enhance their targeting algorithms to exploit what they know. Why? They get paid in both cases.

But banning tracking, or at least requiring it to be opt-in, which would both be good things to do, wouldn't address the fundamental problem I outlined in Google's Fenced Garden:

So we can make the following statements:

• Search is essential to the usefulness of the Web, and thus the Internet.
• US Web search is dominated by a single search engine, and there is no realistic prospect of displacing it.
• The dominant search engine is funded by advertising, which involves a fundamental conflict of interest; the results users see are not the best answers to their query but those that are most profitable for the search engine.
• The most profitable searches reflect the interests of the wealthiest companies (and of the politicians they fund). Accurate information about "controversial" issues, such as climate change, becomes hard to find.

Weinberg's op-ed is a good read, and he is right as far as it goes. But, for obvious reasons, he doesn't want to point to the conflict of interest underlying all advertiser-funded search engines.