Privacy in the Age of Big Data

Consumers reveal more than ever before consciously through social media and, just as importantly, unconsciously through their behaviors. This data gives marketers great power, which they can use to design better products, hone messages and, most importantly, sell more by providing consumers what they want. That’s all good from a marketer’s perspective, but for consumers, the scope of data collection can often cross a line, becoming too intrusive or too loosely held. Marketers have to balance the opportunities of Big Data with the concerns of consumers or they risk a serious backlash.

Consumers reveal more than ever before consciously through social media and, just as importantly, unconsciously through their behaviors. This data gives marketers great power, which they can use to design better products, hone messages and, most importantly, sell more by providing consumers what they want. That’s all good from a marketer’s perspective, but for consumers, the scope of data collection can often cross a line, becoming too intrusive or too loosely held. Marketers have to balance the opportunities of Big Data with the concerns of consumers or they risk a serious backlash.

For some people, the line has already been crossed. When Edward Snowden revealed information about the government’s data collection policies, he presented it as a scandal. But, in many ways, what the NSA does differs mainly in scope from what many private marketers do. A German politician recently went to court to force T-Mobile to release the full amount of metadata that it collects from his cellphone behavior. The results highlighted just how much a company can know from this data—not just about an individual’s behavior and interests, but also about his or her friends, and whom among them are most influential. Even for marketers who strongly believe in the social utility that this enables, it highlights just how core an issue privacy has become.

So how can marketers get the most from data without alarming consumers? Transparency and value. For some consumers, there’s really no good use of personal data, so opt-outs have to be clear and easy to use. The best way to collect and use data is if the value to the consumer is so clear that he or she will opt in to a program.

One company that has framed its data collection as a service that’s worth joining is Waze, which Google recently bought for over a billion dollars. Google beat out rivals Facebook and Apple because high-quality maps are one of the most important infrastructure tools for the big mobile players. Well, before Google bought the company, CEO David Bardin said, “Waze relies on the wisdom of crowds: We haven’t spent billions of dollars a year, we’ve cooperated with millions of users. Google is the No. 1 player. But, a few years out, there’s no excuse that we wouldn’t pass them.”

Drivers sign up for the app to find out about traffic conditions ahead; inherently useful information. Once they’re logged in, they automatically send information about their speed and location to Waze. Waze invites active participation, too, encouraging users to fix map errors and report accidents, weather disruptions, police and gas stations. Users get points for using the service and more points for actively reporting issues. With 50 million users, this decentralized data entry system is incredibly efficient at producing real-time road conditions and maps. Even Google’s own map service can’t match the refresh speed of Waze maps.

Points for check-ins don’t fully explain why people are so invested in Waze. Dynamic graphics help, with charming icons and those de rigueur 3D zooming maps. Even more important than a great interface, however, is that Waze serves a real-time need while making users feel part of a community working together to solve problems. Waze is part of a broader movement to crowdsource solutions that rely on consumers or investors who believe in the mission of a company, not just its utility. People contribute to Waze because they want to help fellow travelers, as well as speed their own journeys. It’s shared self-interest.

Waze has a relatively easy task of proving the worth of a data exchange. Other companies need to work harder to show that they use data to enhance user experiences—but the extra effort is not optional.

As marketers become better at using data, they will need to prove the value of the data they use, and they need to be transparent on how they’re using it. If they don’t, marketers will have their own Snowdens to worry about.

Why Advertisers Need to Think Native

Native advertising is the latest buzzword. Even venerable publishers such as The New York Times, The Atlantic and Forbes, are trying it out. Is the trend bound to fade, or is it here to stay? Despite some shoddy applications, it’s here to stay.

Native advertising is the latest buzzword. Even venerable publishers such as The New York Times, The Atlantic and Forbes, are trying it out. Is the trend bound to fade, or is it here to stay? Despite some shoddy applications, it’s here to stay.

Although the term “native advertising” was coined by the venture capitalist Fred Wilson just under two years ago, the concept is neither new nor unprecedented. It covers any advertising format that is customized to the user experience of a given platform. Or, in the words of Gini Dietrich, native advertising “integrates high-quality content into the organic experience of a given platform.” A 30-second ad during the Super Bowl? Native. Sponsored stories in Facebook? Native. Paid results on Google? Native. The brilliant humor pieces produced by the Onion that overtly pitch products? Native.

All of these advertising formats work within the existing user experience of a medium to deliver messaging that enhances the experience, or at the least does not interrupt the flow of it. Where it goes wrong is when it interrupts or detracts from the user-experience in fundamental ways.

Take the controversy over the The Atlantic‘s favorable article on scientology, which was paid for by Scientology in response to another more negative story. Readers of the magazine had a hard time distinguishing that this was, in fact, bought. The tone and the format mimicked standard Atlantic articles. By eliding the distinction between paid and editorial content, Atlantic was undermining its reputation for objectivity. Users come to the Atlantic for powerful, independent thinking on society and current affairs. An ad that mimics the form of an independent piece of writing on an important cultural topic detracts from its reputation for independence. Andrew Sullivan goes even further:

“This is corporate propaganda, not journalism. Yes, it is identified as such—but on the video page, actual journalism by brilliant writers like Alexis Madrigal is interspersed with corporate-funded propaganda. You can easily mistake one for the other.”

Not all publishers need to be as careful about creating clear divisions between their editorial content and their sponsored content. Aggregators and news repackagers, such as BuzzFeed or the Huffington Post, are already taking information from a variety of sources. But even they need to ensure the quality of the content and the clarity of tags that show the content as sponsored. People don’t mind paid content if it provides useful information or entertainment value—or if the paid content resides in a context where all of the content is highly opinionated. SayMedia has thrived in this niche by providing content with strong positions on trends, tech and society. Including paid content fits right in.

The real potential for native advertising, however, is where it actually enhances the user experience in new media formats. The Onion has proudly embraced its cynicism, best stated in a column by its advertising columnist Hammond Morris, “Look, I know this may all seem somewhat untoward, and we can go through a whole dog-and-pony show here where I pretend that this column exists as a forum for ideas, and that I act as an independent voice who isn’t beholden to advertisers, and the power of the First Amendment, and blah blah, etc. etc. But let’s get real for a second here, okay? This column—nay, this entire website, this entire industry we call journalism—exists for one purpose and one purpose only: to sell ads. Lots of ads.”

It’s not just that it’s completely self-aware, it produces advertising that’s genuinely funny. The Onion has gone as far as setting up its own in-house creative group called Onlon Labs with the goal of creating funny, self-aware advertising completely in-line with the rest of the Onion‘s content.

The New York Times last week introduced a native advertising format that likewise provide useful information for its readers. The content appears as a tab in The Scoop, the Times‘ activities discovery app, and it provides information about the Citibank-promoted bikeshare program. According to the press release: “This is just one example of how we are working more closely with our advertisers to create unique and custom campaigns to help them tell their brand story in innovative ways,” said Denise Warren, executive vice president, Digital Products and Services Group, The New York Times. “The integration of Citi Bike’s robust content complements The Scoop app’s main objective—to serve as a guide to New York City. With these new features, we hope to further enhance the experience for users of The Scoop as they explore the city using their iPhone.”

Whether or not the tab gains widespread usage is an open question. But the Times did its homework. It knows how people use its media properties. It knows the information that would be useful to its users. And it knows what will compromise its underlying credibility. With that knowledge, it created a new advertising product. That’s how advertisers need to think.

The key takeaway for advertisers is you need to know how a user interacts with the medium—and that new media might have native advertising formats that completely differ from existing formats. Advertorials and space ads might make sense in a lot of contexts, but even more effective formats might open up if you just think about what actually enhances the user’s experience. That’s the promise of native.

Wearable Mobile Devices Are the New Black

This year’s hot trend in fashion is computers. Whether at SXSW or in the tech and media hubs on the coasts, people are excited about the watches, wristbands and “eyeframes” that double as computers. Not all of these gadgets will succeed and those that do probably will evolve rapidly from today’s versions. But the trend is real—and marketers need to take note. They can expect consumers open to new forms of discovery and deeper relationships with brands, but also who have less tolerance for advertising that’s irrelevant, disruptive or disrespectful of privacy.

This year’s hot trend in fashion is computers. Whether at SXSW or in the tech and media hubs on the coasts, people are excited about the watches, wristbands and “eyeframes” that double as computers. Not all of these gadgets will succeed and those that do probably will evolve rapidly from today’s versions. But the trend is real—and marketers need to take note. They can expect consumers open to new forms of discovery and deeper relationships with brands, but also who have less tolerance for advertising that’s irrelevant, disruptive or disrespectful of privacy.

Nothing exemplifies the widespread interest in wearable computers better than Pebble, a watch that has its own Internet interface, apps and waiting list of fans eager to buy it. Last year, the founders of Pebble went to the crowdsourcing site Kickstarter with just a vague business plan and raised $10 million from thousands of investors. In less than a year, Pebble started to ship product and, in the past month, has released programming guidelines for outside developers. Not to be outdone by a start-up, Apple, Google, Samsung and LG are all rumored to be working on smartwatches, and Nike has made a big splash with its own wristband that tracks calories burned—the Fuel Band. Probably the most ambitious of all is Google Glass, the smartphone/eyeglass hybrid that projects information directly onto the lens of the wearer. Initial versions for developers have begun to ship already.

All of these devices will take the mobile revolution to a new level. The original iPhone ushered in an era when consumers expect to receive relevant answers any time, anywhere, to any question—even if they haven’t asked it yet. Still, wearable computing adds another layer of complexity. With screens that are always on and always feeding information, there’s even less of a margin for error with irrelevant advertising, and more opportunity for location-specific discovery. There will be new types of data—e.g., biometrics, location, eye movements—that could be incredibly relevant to marketers, but also frightening for consumers already worried about personal privacy. As a result, most marketing opportunities will have to be truly opt-in and transparent in how data will be used—and how that use is actually a service.

Take Google Now, a service that lets users receive pertinent time-sensitive or location-sensitive information without asking for it. It’s currently on phones, but it’s ideally suited for Google Glass. Although Now has high use-value, there’s also a high potential for creepiness, something Baris Guletkin, co-creator of Now, understands: “We take privacy very seriously, and make it very clear what the user will get, and what kind of data we’ll be using, and lots of controls so they can turn things off that they don’t like.” Google is banking on the fact that a lot of people will make that tradeoff in order to get useful information on-the-go. If I’ve just landed in Paris on an overnight flight and I am walking to a meeting, I’m OK with Google knowing what type of food I like if that information is used to suggest boulangeries along my route with highly rated croissants. But not everyone will feel that way.

Current discovery engines, such as Yelp and Foursquare, could probably also make a relatively easy transition to something like Google Glass or evolved versions of a smartwatch. Other marketers, however, will have to create new ways to use personal data and tags within physical objects to provide information that’s pertinent and enhances a real-world experience, not interrupts it. Peter Dahlstrom and David Edelman of McKinsey have written a great article about “on-demand marketing,” They describe a scenario where a headset has an NFC chip that communicates with a smartphone and opens an app that shows the headset in different colors and has related offers. Combined with augmented reality on Google Glass, the possibilities for this type of technology are pretty exciting. Even if Glass doesn’t catch on with the mainstream population, it will likely spur innovation that will trickle down to smartphones.

In addition to discovery, a second transformative role for wearable computers may be in how they turn solitary offline activities into daily social activities, creating a durable bond with the brand.

Nike’s Fuel Band is a great example. Nike has taken the daily workout and turned into a shared activity. The wristband uses a motion detector to calculate the amount of calories a person is burning during the day and tracks it against personal goals. It also connects to an app that shares this information with friends, creating value by turning the fuel points into shared successes and, for some, a competition. Because it’s always on, it creates dozens, even hundreds, of daily touchpoints with the brand.

Fuel fully aligns the brand with staying in shape, a high value for many people, and the core need that its other products satisfy. Eventually, Nike could connect Fuel points to support public causes, which would align the brand with the core values of the “new consumer,” described by sustainable branding agency, BBMG,

“Thirty percent of the U.S. adult population—some 70 million consumers—New Consumers—are values-aspirational, practical purchasers who are constantly looking to align their actions with their ideals; yet tight budgets and time constraints require them to make practical trade-offs every day … To deliver on total value, it’s no longer about pushing products, it’s about creating platforms for ideas and experiences that help people live healthier, greener and better.”

The Fuel Band and competitors like Jawbone are such platforms. They don’t just turn offline activities into online, social ones, they also link the brand to the values of the customer.

The Fuel Band right now is one of the first wearable computers that has been a commercial success, because it enhances existing activities in innovative ways. We’ll soon see whether Glass, Pebble and others have similar levels of success. Regardless, we’ll continue to see new wearable computers down the line, and they will undoubtedly lead to new opportunities for marketers that are impossible to see today.

Credit Card Companies Are Our Role Models

Data makes the modern marketing world go round. More data, however, doesn’t automatically translate into more insights. Even with the tetrabytes of data collected each day, a lot of it remains atomized and difficult to turn into insights because of gaps between marketing and purchase information. Now credit card companies have begun to fill this void.

Data makes the modern marketing world go round. More data, however, doesn’t automatically translate into more insights. Even with the tetrabytes of data collected each day, a lot of it remains atomized and difficult to turn into insights because of gaps between marketing and purchase information. Now credit card companies have begun to fill this void.

Direct marketers have long lacked the glamor of brand marketers. There’s no show about them on AMC and they don’t lead at Cannes. But, by way of solace, direct marketers have always had numbers-cold, hard support that their advertising works.

Turns out, it can be very hard to determine which channel was pivotal when marketers pepper consumers with ads from all directions. The effect of a given advertisement, if any, gets lost. At the same time, consumers have a myriad of sales portals. A person can see an online ad while browsing her desktop at work, then buy later from home or the next day from her phone after finding it on Google-or walking down the street to a shop and buying it.

For direct marketers accustomed to a neat closed loop, this uncertainty gnaws at them. Finding a way to cleanly close the loop is a priority.

It turns out, another industry facing challenges from data and technology has been exploring ways to close the loop. Credit cards have a tremendous amount of data on purchase behavior. But, until now, they haven’t done a lot with it. In the last couple of years, however, they’ve woken up to the potential.

A few months ago, Mastercard bought Mu Sigma, a data analytics company. Although privacy concerns prevent Mastercard from offering transactional information about individuals, it can provide aggregated data about shopping behavior. Mu Sigma gives Mastercard to identify relationships between different purchases, how they relate to each other, and how they might relate to other bits of information, such as location or demographics. It’s not a large leap from there to provide aggregated information about the performance of marketing campaigns.

Of all of the credit card companies, American Express has done the most to link advertising with purchase information. The company has been a true innovator in direct response advertising on social media. Amex can track advertising on all types of platforms through to the point of purchase. A good example is a campaign using the Xbox and Halo, where game players receive rewards from advertiser partners. When players go to the partner, they automatically can redeem the rewards. It’s similar to programs that Amex has done on Foursquare, where Amex cardholders link their accounts to their check-ins and receive coupons in return. Or a program on Facebook, where cardholders sign up for special discounts. They receive the discount when they use their card-and Amex can track it all. Most recently, Amex has pioneered a program with Twitter, where users can sync their Twitter accounts with their cards, allowing them to buy products simply by tweeting a promotional hashtag.

Amex’s pioneering efforts in social marketing and Mastercard’s analytics products are early attempts linking purchase behavior with other marketing information. By doing so, they’re providing a bridge that closes the loop in today’s diffuse media world.

Facebook Embraces Direct Response

Facebook dominates the Web, but it’s never really cracked the direct response puzzle. That looks like it will change in 2013 with an avalanche of new measurement and targeting tools. As a marketing platform, Facebook has traditionally thrived at top-of-the-funnel advertising. Unlike search, which hits people just as they express an interest in buying a certain product or service, social media marketing at its best builds relationships, and there’s compelling evidence for its value.

Facebook dominates the Web, but it’s never really cracked the direct response puzzle. That looks like it will change in 2013 with an avalanche of new measurement and targeting tools.

As a marketing platform, Facebook has traditionally thrived at top-of-the-funnel advertising. Unlike search, which hits people just as they express an interest in buying a certain product or service, social media marketing at its best builds relationships, and there’s compelling evidence for its value.

The heavy lifting for this type of advertising, however, happens on the advertisers’ own media—their brand pages. Although Facebook doesn’t charge for brand pages, it can still make money from them by selling ad units that encourage users to become fans, or that amplify the reach of content shared on the page. In a lot of ways, these are straight direct response ads, but with a call-to-action for a “like” or “share” and not a sale.

Showing marketers how many likes or conversations an ad produces is one thing, but proving ultimate sales is another, much more difficult job. Because Facebook advertising traditionally operated high in the funnel, the platform has long suffered from a “last-touch” bias. Click rates and conversions probably underestimate the actual impact of advertising on the Facebook platform, especially for the small display ads that appear to the right of the newsfeed. If people see an ad while they’re checking in on their friends, they may not click. Or they may click on it and do nothing. Later, however, they may decide to go to the website or a store and make a purchase. It’s often this last channel that gets outsized credit for this sale.

Overcoming this last-touch bias has become an imperative for Facebook. First of all, Facebook has developed “sponsored stories,” a native ad format that appears in the newsfeed and refers to how a friend interacted with a brand—becoming a friend, commenting on an article, redeeming an offer, etc. They still pivot off the relationships within Facebook’s social graph but have much higher CTRs and engagement. With these ads, Facebook has a more powerful format, where CTR becomes their ally as opposed to an obstacle.

Facebook is also trying to move down the purchase funnel by giving advertisers the ability to reach people who have already shown interest in a brand. Last year, Facebook introduced two new advertising products that do this. Custom Audience targeting lets advertisers upload their proprietary lists and match them with Facebook users to deliver sponsored stories or standard display ads to their existing customers. Early results show that these custom lists produce higher CTR and lower cost-per-lead. In February, Facebook reached an agreement with big data aggregators Epsilon, Axciom, BlueKai and Datalogix to import even richer audience segments.

Ulitmately, an even more important innovation might be Facebook Exchange, which allows marketers to retarget ads on Facebook. Through cookies and other tracking tools, Facebook can identify which websites users have visited—and even specific products they’ve browsed—and then deliver ads based on this information. Although the exchange is still in its early stages, it too has shown promising results.

Through Custom Audiences and its Exchange, Facebook is digging deeper into the buying process, but its big challenge remains attribution. It needs ways to span the gulf between advertising on the Facebook platform and the ultimate actions it produces. Custom Audiences and the Exchange have shrunk the width of this gulf but haven’t eliminated it—and its advertising team knows it.

That explains why Facebook bought Atlas Solutions from Microsoft right at the end of February. The ad server enhances Facebook’s ability to track online purchases. In announcing the service, Facebook’s Head of Monetization Product Marketing Brian Boland said, “Why we’re doing this is not to launch an ad network, and why we did do this is to improve measurement. We heard loud and clear from advertisers that they want to understand multi-touch attribution instead of just looking at the last click.” With the ad server, Facebook can deliver more types of ads to more publishers and, most importantly, it can effectively follow what users do online. It’s an incredibly powerful tool for online attribution.

It is made even more powerful when paired with Facebook Connect, a plug-in for online publishers that lets visitors log in to a website with their Facebook email and password. The service gives websites a simpler login process and gives them access to a rich layer of biographical information and connections that Facebook has amassed. Facebook, in turn, can see what people are doing all across the Web, not just in their walled community and, importantly, it can track activity across multiple devices, as long as a user has logged into Facebook from that device. If you see an ad on your desktop but convert via your phone or tablet, Facebook can track the activity.

Combining Atlas and Facebook Connect produces a powerful suite of online measurement tools. With a partnership with Datalogix, it can even track activity offline via loyalty cards and email addresses collected at checkout. With these tools, Facebook seems positioned to fully “close the loop” and overcome the last-touch bias. In classic direct marketing fashion, they also let Facebook better optimize who receives advertising. If you know who’s bought your products, you’ve found a great audience for future purchases.

Better measurement tools and advertising formats with higher click-rates transform Facebook into a legitimate direct marketing player. With Facebook experimenting with a slew of new DR formats and tools, including trigger-based Gifts, the social search tool Graph Search, redeemable Offers, and its gift card called—what else—Facebook Card, Facebook seems finally to have embraced it inner direct marketer.