The Age of Personalized Advertising

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Before making the movie “Minority Report,” Steven Spielberg was strugglingto imagine life in 2050. So he assembled a group of leading science and technology thinkers to spend a weekend dreaming up the future. One of the film’s most memorable depictions was the personalized advertising, where in-store and outdoor advertising addressed consumers directly, taking into account the person’s context and past purchases. What shocked the consultants the most was how quickly their predictions came true.

“What we thought would take 50 years took 15,” Douglas Coupland, author of “Generation X” and one of the 1999 Spielberg Summit’s participants, told an audience in London last month.

Michael Altendorf, the founder and CEO of Adtelligence and a scheduled speaker at NOAH 2013 in London November 13th and 14th, is one of the people at the forefront of personalized marketing, helping brands harness big data and machine learning to tailor their web sites so that they look different to each customer. His Mannheim, Germany-based company was named a 2014 Technology Pioneer by the World Economic Forum in recognition of the potential its technology offers to influence and shape the future of business and society.

Worldwide, digital ad spending topped $100 billion in 2012, according to eMarketer. (See the story on pages 1, 22 and 23 for more on on-line advertising trends.) And digital ad expenditures are projected to nearly double between 2012 and 2016, increasing to $163 billion from $87.3 billion. If pundits are right, the effectiveness of those ads will depend largely on personalization. The companies that understand how to operate in this new environment are hot. Witness Criteo, an ad-targeting company that prices and supplies personalized advertising in real time for its e-commerce clients. It listed on NASDAQ in late October, raising $251 million in an upsized IPO that is further increasing excitement around the sector.

“We are going from a totally anonymous Internet- where we knew a bit about you, but not everything — to a totally personalized web where we know

everything about you,” says Altendorf. You already see it happening, he says. Google algorithms personalize search results based on your history and serve targeted ads. Yahoo! delivers different headlines to each visitor. Then there’s the personalized recommendations on Amazon’s landing page.

Adtelligence works with more than 100 companies, offering them technology that customizes web pages on the fly based on customer demographics, social networking, and product interest information.

The company’s business had been concentrated in Europe until now, but it has already started working with clients in the United States and is in talks with potential clients in Japan. Adtelligence has built up experience across nearly every e-commerce sector including travel sites like Opodo and eDreams, rental car company Sixt, fashion retailer Zalando, gaming companies Travian Games and ProSieben Games and car classifieds autohaus24 and larger “eBay-scale” brands that Altendorf says he cannot name for competitive reasons.

So far in every case, personalizing the user experience has a dramatic effect, significantly boosting conversion rates and revenues, he says. “We are all individuals; you and your wife have different interests,” he says. “If you know who’s coming, what time and where they are, it definitely makes sense — especially if they’re on a mobile phone, to show much more tailored content or products.”

Customization could be a retailer re-ranking a selection of millions of products to show the top 10 that are most likely to appeal to the customer. For example, a man shopping for clothes isn’t interested in women’s fashion. Or it could be a travel site changing the destinations it promotes based on the user’s location. People in London are more likely to want to fly to Barcelona, than Munich, Altendorf says.

Or, it could even mean changing the site’s appearance to better suit visitors’ layout or color preferences. “We have a car rental service that found if you rent a car in Munich there’s better conversion rate if you show the site differently than you would in Berlin. And to be honest, it works,” Altendorf recounts. “In Munich, the background has to be orange, but in Berlin they love a white background and they’ll just buy 20% more. It’s because the brand is much stronger in Munich so they’ll buy more with the orange because of the branding.”

The larger the site, often the bigger the lift in sales, he says. This is particularly because larger brands’ sites were first designed 10 to 20 years ago, long before personalization was possible. “If you take these sites sometimes huge clients make uplifts of 30% to 40% plus,” Altendorf says, “This is, for them, unbelievable.”

To prove the technology, Adtelligence will normally take 10% of a site’s traffic for a month. Then once they can show it works, all traffic is routed through Adtelligence’s system.“It’s like a cloud layer that is on top of the shop … Then once somebody clicks on the product and puts it in the basket, you jump into the shop system,” he says.

“The data is owned by the e-commerce shop. Especially the profiles. The only thing we are interested in is the correlations between GPS location, the kind of device and the product ID, for example. This is what we will try to learn from: the product graph, interest graph, search graph. Then we try to put it all together.”

Personalization might not look like Minority Report yet. On desktops, we log in and out of sites but our mobile, which is fast becoming people’s primary device, is always logged in, Altendorf says. Mobiles are key to sending and
receiving practical personalized information. “For instance, if you know you fly tomorrow from London to Barcelona, we know we can tell three hours before how long you will be in traffic. We know when you arrive on your gate at the airport. We can show you the parking lot.

We can show you the way to the gate,” he says. The mass adoption of Google Glass and other wearable smart devices will only open more possibilities. “This big wall between anonymized web and personalized web is falling away,” Altendorf says.

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