Thursday, March 1, 2012

Some Insight Into Intermediaries

Everybody knows that the Internet is an amazing invention. Through it, we can connect to friends, learn new things, be entertained, and all sorts of other things all without paying a dime. However, we have to remember that everything comes with a price. And I'm not just talking about ads, everybody expects to be assaulted by ads when going online, I'm talking about data mining.

Now, this is not necessarily a bad thing, in fact, in many cases it is a good thing. We get more personalized content and importantly it lets publishers get more information, so they can make more money from their ads, so we can get more free content. However, to do this, our online information is thrown about to a wide variety of companies forming the online advertising pipeline: advertisers, intermediaries, and publishers. And, although publishers and advertisers are what we see in this pipeline, what are really interesting are the intermediaries, the ones getting the right advertisers to the right publishers.

One of the most straightforward ways they do this is with demographic, geographic, and behavioral targeting. However, rather than just targeting publishers as in traditional advertising, they can also target individuals. By tracking cookies and trading information with the publishers, these intermediary companies can track your online presence, so even if you are currently looking up cute cat pictures on the internet, you could still be getting ads for those heavy metal concert tickets you have been eying recently.

But, that is just the beginning of what they can do. Say you are a website and want to target customers who are likely to buy again, how would you do this? One trick they use is that when a customer comes to your site, you drop a cookie on them. Then you send ads their way and see who comes back, creating a profile of who are likely to come back. Then you just rinse and repeat until the profile consists only of people likely to come back. Pretty cool, huh?

However, they don't just match advertisers with publishers, some also do quality control, making sure the advertisers and the publishers make their money's worth. By tracking which users get which ads and how they respond by collating information among the publishers, it becomes possible for even third party entities to track ad value.

The combination of these techniques and many more shows just how complicated, yet amazing this whole industry is. The fact that so many companies with limited information in this industry form a distributed market that keeps the whole Internet going and profitable is, quite frankly, mind-boggling.  


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