Online Ads Increasingly Target Specific Users

STEVE INSKEEP, host:

On Mondays we talk about technology. And today we'll look at more ways that ads are increasingly targeted for individual Internet users. If you and your friends go to a site like Yahoo at the same time, each of you will probably see a different ad on the page.

NPR's Wendy Kaufman explains how it works.

WENDY KAUFMAN: Nearly all the ads you see online are sent out by just two companies, DoubleClick and Atlas. Each has breathtakingly large databases of what ads have been sent to your computer. They also know a great deal about what you did once the ad appeared on your screen.

Mr. YOUNG-BEAN SONG (Vice President, Atlas): Let me show you something...

KAUFMAN: Young-Bean Song is the vice president at Atlas, which delivers about five billion ads a day. Nearly all those ads contain tracking codes called cookies that identify your computer.

Mr. BEAN SONG: All the billions of ads that we're serving, each one of those creates a log record that looks something like this, right? And so this is somebody who saw two ads on Yahoo Finance. They clicked on the second ad, and they went to the advertiser's Web site, went to the registration page, back to the homepage, and then eventually purchased.

KAUFMAN: The tracking codes don't identify individuals, just the machine itself. Still, advertisers have a pretty good idea of what you like and what you don't. And they can target their ads accordingly.

Jonathan Rossof(ph) is with the digital marketing firm Avenue A/Razorfish.

Mr. JONATHAN ROSSOF (Avenue A/Razorfish): So a visitor will come to a Web site and in a microsecond the site will be forming itself as a template, and there will be spots opened for ads.

KAUFMAN: In essence, the Web site says hey, we need an ad that makes sense for this visitor, and just like that it appears. Instead of a generic airliner ad, for example, you'll get one offering flights to New York, if that's what you've been searching for online.

(Soundbite of crowd)

KAUFMAN: When Avenue A/Razorfish teams begin to create a new ad, they use the computer data in yet another way, to help create ads that people will want to look at.

(Soundbite of ad)

Unidentified Woman: Time to soak up the rays.

KAUFMAN: This ad for Carnival Cruise Line lets you wander around the ship and even come down the water slide.

(Soundbite of water slide)

KAUFMAN: Young-Bean Song of Atlas says using tracking data, these computers can also gauge how well people enjoy ads such as that one.

Companies that deliver and analyze online ads are highly valued. Indeed, Microsoft spent $6 billion earlier this year to buy the company that owned both Atlas and Avenue A/Razorfish. Google is trying to buy the online ad firm DoubleClick.

Over the past couple of weeks, you may have heard a lot about ads on social networking sites. Advertisers on MySpace can now deliver tailor-made banner ads based on information MySpace users post on the site, and advertisers on Facebook, let's say a restaurant, can target ads to Facebook users who live nearby.

And that's not all. Charlene Li, an analyst at Forrester Research, says the restaurant could highlight the fact that one of their online friends is a regular customer.

Ms. CHARLENE LI (Forrester Research): Now the ad has context. It's no longer just a restaurant that's a good five miles of your home. It's a restaurant that a friend just ate at and loved. That's an endorsement.

KAUFMAN: With well over a 100 million people participating in social networks, the power of targeted ads could be extraordinary.

Wendy Kaufman, NPR News, Seattle.

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