^{Democracy & Technology Blog} Targeted ad bubble?

On Friday Scott Cleland predicted that online advertising is an investment bubble which will eventually burst as a result of latent consumer privacy concerns.

Expect privacy concerns to be the eventual catalyst that ultimately bursts the Internet investment Bubble 2.0. It is rare when there is a profound disconnect and suspension of reality between industry behavior/investment expectations and customer wants, needs and expectations, but that is precisely what is at work in Bubble 2.0.

In the Wall Street Journal, Scott Thurm reported that venture firms have invested $4.7 billion since 2007 in 356 online ad firms. The investment climate is “frothy” according to one of Thurm’s sources. And there’s an arms race among the start-ups for math specialists, he reports. Some specialists are migrating to advertising from Wall Street.
Sounds eerily familiar.
Another item in the same publication caught my eye this morning, and suggests — to me, at least — that we may also have an irrational boundless-optimism effect on our hands. Julia Angwin and Emily Steel cite a knowledgeable source who suggests that large amounts of data for targeting ads do not necessarily produce “great results” for advertisers.

A cofounder of Allow, Justin Basini … came up with the idea for his new business when working as head of brand marketing for Capital One Europe. He says he was amazed at the “huge amounts” of data the credit-card companies had amassed about individuals.
But the data didn’t produce great results, he says. The response rate to Capital One’s targeted mailings was 1-in-100, he says–vastly better than untargeted mailings, but still “massively inefficient.” Mr. Basini says. “So I thought, ‘Why not try to incentivize the customer to become part of the process?”