Article 0012030

INTERNATIONAL BUSINESS REVIEW JOURNAL

INTERNATIONAL BUSINESS REVIEW JOURNAL.

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The Value of Behavioral Targeting
Published March 2010.

Howard Beales

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Howard Beales has been an Associate Professor at the School of Business at George Washington University since 1988. He formerly was the Director of the Bureau of Consumer Protection at the Federal Trade Commission.

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This study seeks to provide an initial understanding of the effect of behaviorally targeted advertising on advertising rates and revenues. A survey of twelve ad networks was conducted to obtain quarterly data on pricing (CPM data), conversion rates, and revenues across various types of ad segments (run of network advertising and behavioral advertising). The survey results reveal three key findings: (1) Advertising rates are significantly higher for behaviorally targeted ads. The average CPM for behaviorally targeted advertising is just over twice the average CPM for run-of-network advertising. On average across participating networks, the price of behaviorally targeted advertising in 2009 was 2.68 times the price of run of network advertising. (2) Advertising using behavioral targeting is more successful than standard run of network advertising, creating greater utility for consumers from more relevant advertisements and clear appeal for advertisers from increased ad conversion. (3) Finally, a majority of network advertising revenue is spent acquiring inventory from publishers, making behavioral targeting an important source of revenue for online content and services providers as well as third party ad networks. This study was sponsored by the Network Advertising Initiative (NAI). The NAI is a coalition of more than 40 leading online marketing companies committed to building consumer awareness and reinforcing responsible business and data management practices and standards. For a description of the NAI and a list of its members, see http://www.networkadvertising.org/index.asp (last visited Mar. 3, 2010).

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Howard Beales

Howard Beales teaches in the School of Business at the George Washington University, where he has been since 1988. His research interests include a wide variety of consumer protection regulatory issues, including privacy, law and economics, and the regulation of advertising. He has published numerous articles addressing these issues in academic journals.

From 2001 through 2004, Dr. Beales served as the Director of the Bureau of Consumer Protection at the Federal Trade Commission. In that capacity, he was instrumental in redirecting the FTC’s privacy agenda to focus on the consequences of the use and misuse of consumer information. During his tenure, the Commission proposed, promulgated, and implemented the national Do Not Call Registry. He also worked with Congress and the Administration to develop and implement the Fair and Accurate Credit Transactions Act of 2003, and testified before Congress on numerous occasions. His aggressive law enforcement program produced the largest redress orders in FTC history and attacked high volume frauds promoted through heavy television advertising.

Dr. Beales also worked at the FTC from 1977 to 1987, as a staff economist, Assistant to the Director of the Bureau of Consumer Protection, Associate Director for Policy and Evaluation, and Acting Deputy Director. In 1987-88, he was the Chief of the Human Resources and Housing Branch of the Office of Information and Regulatory Affairs in the Office of Management and Budget.

Dr. Beales received his Ph.D. in economics from the University of Chicago in 1978. He graduated magna cum laude from Georgetown University with a B.A. in Economics in 1972.