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Democracy and 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?”

Hance Haney

Senior Fellow, Technology & Democracy Project
Hance Haney is Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.