Online ad twist: Mind your own data

A stealth start-up on Monday plans to take the wraps off a new advertising data exchange designed to connect publishers and advertisers so they can target ads to Web surfers. The privacy pitch: consumers can tweak the advertising data held about them.

The start-up, Bellevue, Wash.-based BlueKai, is taking a novel approach in an otherwise crowded new market for Internet advertising technologies. Many start-ups, ad networks, and Net media giants are honing technologies to leverage vast troves of data about people online so that they can tailor ads to their behaviors, preferences, or demographics--so-called behavioral ad targeting. One targeting trick is to collect data about what someone does at one site, (e.g., reading a Las Vegas travel article at CNN.com), and then target an ad (e.g., cheap flights to Vegas) while they're visiting another site.

BlueKai wants to play middleman in that equation. With BlueKai's exchange, sites like AutoBytel can sell anonymous data about the people, for example, who have configured a BMW Mini Cooper on its site in the last month. (AutoBytel would use a tag called a cookie to identify that person's computer, without a name or address.) Then sites like CNN.com could buy that data (in the form of identifying cookies) so that when those people show up at its site, BMW could show a Mini Cooper ad.

BlueKai CEO Omar Tawakol said data exchanged on its service is anonymous. To participate, publishers, sites, and advertisers must agree not to combine personally identifiable information about people with non-identifying cookies. Consumers will also be able to see what information is linked to them (cookies on their PC) in BlueKai's registry database, which will launch Monday. Data might include the person's ZIP code and interests like luxury cars, BMWs, Las Vegas travel, and so on, depending on how often they visit BlueKai's partners.

"We're creating a data economy, where you can get data from a seller to a buyer as long as they meet privacy rules and make the payment. Our job is to set the rules, ensure payment, and guarantee some notion of quality," said Tawakol.

The consumer registry, he said, is meant to get people accustomed to the idea that their data is worth something. For now, BlueKai will let people give to charities like the March of Dimes by maintaining data on the site, but five years down the road they might invest their data like they invest money.

"We need to stop trading data in the shadows," he said.

Tawakol, who previously worked at behavioral ad targeting company Revenue Science, said this is the first ad exchange focused on so-called intent data, meaning that people have demonstrated an explicit interest in buying a product or service. Ad experts say such intent data is why search engines like Google have had so much success--people simply type what they want into the search bar and a related ad appears. BlueKai aims to do the same thing to improve the targeting of banner or display ads by trading intent data from sites related to auto buying, travel, and shopping.

A publisher like video site Tremor can go to the exchange to buy data for 3 million people who are in the market for an SUV, for example, demonstrated by whether they've configured a car. Tremor can then upsell targeted ads to those people from Ford, General Motors, or another SUV maker. Like Google, the exchange is based on bid pricing, meaning that advertisers bid against each other for the data. Advertisers or publishers may pay half a cent for a unique cookie, or in the case of the 3 million SUV shoppers, $15,000 for the campaign. But just like with search, the cost varies by the type of consumer.

BlueKai's Tawakol compares the idea to the direct mail marketing business. Offline, marketers call up a data company like Axciom to buy the names and addresses of household decision makers in a certain ZIP code, for example. Then they would take that data and create a campaign.

He said that there's a huge opportunity to take data from sites like Orbitz or Amazon.com to establish shopper intent.

"The behavioral targeting problem is when you rely on context, like someone reading about travel so you assume they're going to book a ticket somewhere, whereas if they go to a travel site, they book something. You know more than Google does about that potential travel," he said. "Buyer data specifies exactly what the user wants."

Consumers buy-in
Still, consumers will need to buy in, too.

"It's already a large opportunity but the Holy Grail is if it becomes something consumers buy into. If they think of it as something they care about and view it as something improving their Internet experience, then you're entrenched," said Ali Partovi, founder of music site iLike who's an angel investor in the company. Partovi founded LinkExchange in the dot-com heyday.

Founded in December 2007, BlueKai has raised a total of $4.7 million from Redpoint Ventures and other angel investors. The company makes money by collecting a percentage of the money exchanged between sellers and buyers of data, but Tawakol would not disclose the split.

So far, only two companies participating in the exchange, Autobytel and video site Tremor, have gone public about their relationship with BlueKai. But Omar said it has relationships with many of the top 10 advertisers, publishers, and travel, auto, and retail sites. All of its partners, however, have had to agree to privacy standards and potentially change their privacy policies to notify people that they are sharing cookie data with a third party. They also must allow consumers to remove specific details, such as travel or shopping interests, or to opt out altogether through a link to the NAI, or the Network Advertising Initiative.

BlueKai's exchange also does not require sites or advertisers to disclose their name to a buyer or seller, but the company will guarantee a site's status and allow a company to say which sites it won't work with.

Marc Rotenberg, executive director of the Electronic Privacy Information Center, has been a critic of the NAI and industry self-regulation. The NAI, he said, has an opt-out system in which people must maintain a cookie on their computer to prevent other Web sites from profiling them, which is counterintuitive to privacy-conscious people who would typically delete all of their cookies.

"In the original DoubleClick model, when they were targeting people based on preference without knowing who they are, we thought that was great. But of course the model changed very quickly, and Internet ads started to link names with cookies," Rotenberg said.

"Where we stand now is that the government should regulate any company that's collecting any personal identifiable information. The company should be liable for any misuse of the data, including security breaches," he said.

"And if there's commercial value I think it should be shared with the individual," he said.