Interactive Advertising Must Tackle Data Mining Taboo

(MoneyWatch)  The elephant in the room at Advertising Week sessions in New York beginning today is the ongoing reluctance of companies to mine user preferences and other data many consumers are willing to share in exchange for more relevant products and services.

The complicated business of online data mining is core to nascent interactive marketing and e-commerce, which have stalled during the recession even as consumers continue to go digital. This week's advertising conclave should be the place to more thoroughly examine and debate data mining and other new sciences that will shape the interactive marketplace. It is sure to be broached in discussions about consumer trust, and maybe even in a Faceboook session aptly titled "Knowing is Better."

Mostly, the agenda promises mostly easy-going show-and-tell. On Madison Avenue and in media, fear is rife of public reprisal or legal restrictions.

An ironic prelude to the week-long fete of advertising's digital future was the Sept. 18 settlement of a privacy lawsuit related to Facebook's social ad experiment, Beacon. The short-lived, poorly executed program riled online consumers, whose purchase information with off-site retailers such as Zappos and Blockbuster was unexpectedly shared with their Facebook friends. Their only recourse was to "opt out" of the program after the damage was done.

While there are mounting examples of online consumers trading their personal information and privacy for more targeted interactive results, Beacon assumed too much with its initial tacit user approval.

Facebook executives say they have gained valuable insight from the experience, although it is unclear how they will use it. Yahoo and Comcast also have been publicly scrutinized over their own data retention and revised use practices. All the brouhaha has not deterred Google, Facebook and Nielsen Media from jointly studying how to effectively monitor, decode and act on user data, conversations and even the subtle expression of sentiments without violating personal privacy standards.

User insights, social connections, personal preferences and buying history -- which Amazon and Google already masterfully manipulate -- are building blocks for an interactive economy that relentlessly exploits links to generate revenues. The absence of more enterprising, carefully crafted data mining applications hinders this development.

For the most part, media companies, agencies and advertisers chose to be digital in safe and comfortable ways without without testing the bounds of revolutionary interactive applications. Even as digital grows from 12 percent of existing overall advertising spend to 21 percent (or $55 billion) by 2014, according to Forrester Research, companies still must master constructive interactive relationships with consumers and each other to generate many times that in digital sales and other transactions.

The more interactive and mobile consumers and technology become, the further away they move from an advertising status quo defined by the likes of static print and television, where a majority of advertising dollars are concentrated in a domestic ad industry that declined 15.4 percent to $57 billion the first half of 2009, according to Nielsen Media.

Even as the recession has eroded advertising budgets and consumer spending, there are signs some marketers are following consumers and technology into the interactive future.

Global spending on mobile advertising will increase 74% this year to $913.5 million and to more than $13 billion by 2013, according to Gartner. Location-based advertising driven by widespread adoption of GPS technology and third-party apps for smart phones and 3G networks will grow mobile advertising in the US and Canada from $208 million in 2009 to more than $1.5 billion in 2013, according to Park Associates.

What exactly will advertisers and media do with those interactive connections, and the insights and information they yield? What do you think?