They’re always watching. 👀
It’s no secret that advertising in the digital age has definitely become a lot more advanced ads. Though it’s become apparent that advertisements online have gotten a whole lot more specific than the usual targeted ads based on your Google searches. Instead, many people are now noticing micro-targeted advertisements based on things they’ve never actually searched for online before, but have talked about in real life.
A couple this past summer did an impromptu study and decided to talk about cat food by their phone (even though they don’t have a cat and would never need cat food) to see if their phone was listening to them. Turns out, a few days later, they started getting cat food advertisements.
So how is this happening and how is it legal? While Facebook commented on the couple’s experiment claiming they would never use client data in that way, the New York Times investigated a program that could possibly be partly responsible for the phenomenon. Turns out the program is not only legal but the amount of grey area surrounding the concept means we really don’t know when our phones are or aren’t listening.
The software reportedly comes from Alphonso, a start-up company that collects TV data for advertisers. Meaning they are looking to grab as much data as they can when it comes to finding out who is consuming what. How they grab that data, though, isn’t primarily by tracking what TV shows you watch on your phone. Instead, the program is apparently installed into mobile game apps that allow them to listen to what is playing on your television.
How the company gains access to your phone is through embedding its software into games you download. If you were to download one of these games, after clicking “accept” when the app prompts for access to your microphone, your phone is all ears. Listening to monitor which TV shows and movies you are watching and then compiling that data to send back to their offices.
While they specify that they only collect TV data, and most likely aren’t the ones behind the niche Facebook ads, other companies similar to Alphonso exist and seemingly compile tons of different kinds of data using your phone microphone. Alphonso is just the first one being brought to the public’s attention. Regardless, with about 250 games on the Google Play Store reportedly containing Alphonso’s software as well as some on Apple’s platform, it’s clear the concept of recording users for data isn’t going away.
As of now, the best way to protect yourself if you don’t want to be recorded would be checking out this list of apps on the Google store that contain the program. Be on the lookout for any app with “Alphonso automated” in the description. Though since we never really know when our phone could be listening, maybe it’s time to go back to a Nokia?
The internet has dramatically expanded the modern marketer’s tool kit, in large part because of one simple but transformative development: digital data. With users regularly sharing personal data online and web cookies tracking every click, marketers have been able to gain unprecedented insight into consumers and serve up solutions tailored to their individual needs. The results have been impressive. Research has shown that digital targeting meaningfully improves the response to advertisements and that ad performance declines when marketers’ access to consumer data is reduced. But there is also evidence that using online “surveillance” to sell products can lead to a consumer backlash. The research supporting ad personalization has tended to study consumers who were largely unaware that their data dictated which ads they saw. Today such naïveté is increasingly rare. Public outcry over company data breaches and the use of targeting to spread fake news and inflame political partisanship have, understandably, put consumers on alert. And personal experiences with highly specific ads (such as one for pet food that begins, “As a dog owner, you might like…”) or ads that follow users across websites have made it clear that marketers often know exactly who is on the receiving end of their digital messages. Now regulators in some countries are starting to mandate that firms disclose how they gather and use consumers’ personal information.
This throws a whole new dynamic into the mix: How will targeted ads fare in the face of increased consumer awareness? On one hand, awareness could increase ad performance if it makes customers feel that the products they see are personally relevant. Supporters of cookies and other surveillance tools say that more-relevant advertising leads to a more valuable, enjoyable internet experience. On the other hand, awareness could decrease ad performance if it activates concerns about privacy and provokes consumer opposition.
The latter outcome seems more likely if marketers continue with a business-as-usual approach. One study revealed that when a law that required websites to inform visitors of covert tracking started to be enforced in the Netherlands, in 2013, advertisement click-through rates dropped. Controlled experiments have found similar results.
Some firms have done better than others in anticipating how customers will react to personalization. Amazon features shopping ads throughout its site, making product recommendations based explicitly—and often conspicuously—on individual users’ search data, without seeming to draw any consumer ire whatsoever. However, in a now-infamous example, when Target followed a similar practice by creating promotions that were based on individual shoppers’ consumption data, the response was not so benign. The retailer sent coupons for maternity-related products to women it inferred were pregnant. They included a teenager whose father was incensed—and then abashed to discover that his daughter was, in fact, expecting. When the New York Times reported the incident, many consumers were outraged, and the chain had a PR problem on its hands. Similarly, Urban Outfitters walked back the gender-based personalization of its home page after customers complained. “We saw customer frustration at being targeted outweigh any benefit,” Dmitri Siegel, the marketing executive in charge of the initiative, concluded in an interview with the Times.
For the consumer who prefers relevant ads over irrelevant ones (an ad-free experience is not realistic in today’s ad-supported web landscape), it’s important that marketers get the balance right. Digital marketers need to understand when the use of consumer data to personalize ads will be met with acceptance or annoyance so that they can honor consumers’ expectations about how their information should be used. The good news is that social scientists already know a lot about what triggers privacy concerns off-line, and new research that we and others have performed demonstrates that these norms can inform marketers’ actions in the digital sphere. Through a series of experiments, we have begun to understand what causes consumers to object to targeting and how marketers can use personalization while respecting people’s privacy.
The Privacy Paradox
People don’t always behave logically when it comes to privacy. For example, we often share intimate details with total strangers while we keep secrets from loved ones. Nevertheless, social scientists have identified several factors that predict whether people will be comfortable with the use of their personal information. One of these factors is fairly straightforward—the nature of the information. Common sense holds that the more intimate it is (data on sex, health, and finances is especially sensitive), the less comfortable people are with others knowing it.
A second, more nuanced factor involves the manner in which consumers’ personal information changes hands—what social scientists call “information flows.” One such norm is, to put it colloquially, “Don’t talk about people behind their backs.” While people may be comfortable disclosing personal information directly (what scientists call “first-person sharing”), they may become uneasy when that information is passed along without their knowledge (what we term “third-party sharing”). If you learned that a friend had revealed something personal about you to another, mutual friend, you’d probably be upset—even though you might have no problem with both parties knowing the information. It can also be taboo to openly infer information about someone, even if those inferences are accurate. For example, a woman may inform a close colleague of her early-term pregnancy, but she’d likely find it unacceptable if that coworker told her he thought she was pregnant before she’d disclosed anything.
In our recent studies we learned that those norms about information also apply in the digital space. In our first study, we collected a list of common ways in which Google and Facebook use consumers’ personal data to generate ads. We then asked consumers to rate how acceptable they found each method to be, and—employing a statistical technique called factor analysis—identified clusters of practices that consumers tended to dislike, which mirrored practices that made people uncomfortable off-line:
- obtaining information outside the website on which an ad appears, which is akin to talking behind someone’s back
- deducing information about someone from analytics, which is akin to inferring information.
Next, we wanted to see what effect adherence to—or violation of—privacy norms would have on ad performance. So we divided participants in our study into three groups. In a simulation of acceptable, first-person sharing, one group first browsed a website; on that same site we later displayed an ad accompanied by the disclosure “You are seeing this ad based on the products you clicked on while browsing our website.” In a simulation of unacceptable, third-party sharing, another group browsed a website and then visited a second site, where we displayed an ad accompanied by the disclosure “You are seeing this ad based on the products you clicked on while browsing a third-party website.” The final group served as a control; like the other groups, these participants engaged in a browsing task and were then shown a targeted ad, but without a message. In all groups, we measured interest in purchasing the advertised product as well as the likelihood that participants would visit the advertiser’s website. Additionally, to understand how these three ad scenarios affected consumers’ attitudes, we asked all participants which they valued more: the personalization of ads or the privacy of their data.
If people dislike the way their information is shared, purchase interest drops.
We found that when unacceptable, third-party sharing had occurred, concerns about privacy outweighed people’s appreciation for ad personalization. Those attitudes in turn predicted interest in purchasing, which was approximately 24% lower in the group exposed to unacceptable sharing than in both the first-party sharing and the control groups—a clear indication of backlash.
We then conducted a similar test using declared (acceptable) versus inferred (unacceptable) information. After completing an online shopper profile, one group saw an ad that was accompanied by the disclosure “You are seeing this ad based on information that you provided about yourself.” After filling out the same form, a second group of subjects saw an ad but were told, “You are seeing this ad based on information that we inferred about you.” A final control group saw the ad without any disclosure. The group that viewed the ad generated through inferences showed 17% less interest in purchasing than the other groups did—even though the ads were exactly the same across groups. In sum, these experiments offer evidence that when consumers realize that their personal information is flowing in ways they dislike, purchase interest declines.
A common practice that advertisers currently use to preempt targeting backlash is to offer voluntary ad transparency. Many now display an AdChoices icon, a blue symbol indicating that the accompanying ad has been tailored to the individual recipient’s characteristics. In some cases, consumers can click on the icon to find out why the ad has been displayed to them. In 2014, Facebook introduced a similar “Why am I seeing this ad?” feature on its site.
Such disclosure can be beneficial when targeting is performed in an acceptable manner—especially if the platform delivering the ad is otherwise trusted by its customers. In one experiment conducted with Facebook users, we first asked participants how much they trusted the social media company. Next, we directed them to find the first advertisement in their Facebook news feed and read its accompanying transparency message. We asked them to indicate whether the message conveyed that the ad had been generated using first- or third-party information and using declared or inferred information. Then we inquired about how interested they were in purchasing the advertised product and engaging with the advertiser in general (by, say, visiting its website or liking its Facebook page). Overall, ads from unacceptable flows performed worse than those from acceptable flows. However, trust enhanced consumers’ receptiveness: People who trusted Facebook and saw ads based on acceptable flows expressed the highest interest in purchasing the product and engaging with the advertiser.
We also found that when trust was high, disclosing acceptable flows actually boosted click-through rates. In a set of field experiments, we partnered with Maritz Motivation Solutions, which runs redemption websites for loyalty programs such as airline frequent-flier programs, a context in which consumer trust tends to be high. These sites use the same technology as the large e-commerce sites, except that the currency is points instead of money. In one experiment, when we revealed first-party sharing by telling shoppers that an advertisement was based on their activity on the site, click-through rates increased by 11%, the time spent viewing the advertised product rose by 34%, and revenue from the product grew by 38%.
With personalized ads, there’s a fine line between creepy and delightful.
Guidelines for Digital Marketers
When it comes to ad personalization, there’s a fine line between creepy and delightful, so it could be tempting to conclude that the safest approach is to keep people in the dark—to obscure the fact that personal information is being used to target consumers, especially when advertising products of a more sensitive nature. Indeed, that’s what Target reportedly tried after its pregnancy promotion scandal: It started arbitrarily inserting coupons for random items in its mailings to expecting mothers, so the baby-products ads would look incidental and less conspicuous. It might also be tempting to manipulate consumers by giving them meaningless opportunities to feel in control that create a false sense of empowerment.
While such tactics may work in the short term, we believe they are ultimately misguided. Even setting aside the potential ethical issues, deceit erodes trust if it is discovered. And as our experiments show, trust enhances the positive effects of using personal information in ways consumers deem acceptable. Research into other areas also suggests that trust has spillover benefits. For example, with Bhavya Mohan and Ryan Buell, one of us (Leslie) has done research on pricing—another area where concealment and manipulation can boost profits in the short term—showing that when firms are transparent about the variable costs involved in producing a good, their consumers’ trust grows and sales rise. Finally, it’s doubtful that concealment will remain a viable tactic; consumers are becoming savvier, and regulators are pressuring companies to reveal their data-collection practices. An off-line analogue may be useful here as a guide: You might gain temporary advantage by deceiving a friend, but the damage if the deception is discovered is deep and lasting. Relationships are stronger if they are honest.