So here we go with my first post about internet start ups. I am not sure yet weather I like their product. But the idea behind it is certainly very clever. What I like about the system is that this kind of advertising is impossible in an offline world. So someone understood what you can do in an online world and created a business model around it. This alone will probably give them quite a bit of success.

What is the idea?

Recently I was searching for a book a friend recommended to me. I wasn’t sure weather I wanted to buy or not. So I did what anyone would probably do. I left the store keeping in mind that I could later decide weather I want to spend the money. Today – about one week later – I was searching for something completely different browsing on a website and realized the advertising of the exact same book by a store I visited before. Interestingly the web shop was a German one and the ad was displayed on an English speaking American website. That was kind of scary. So what happened here? I was looking at the source code and figured out that Criteo (not Google!) is running the Ad server behind it. A quick scan on their homepage lead to the following video:

I think the idea is very clear. The problem with this issue as usual is privacy so let’s dig into it.

privacy concerns of Criteo

As we saw on the video the whole system works – as we could have guessed – by setting a cookie.

“A cookie, also known as a web cookie, browser cookie, and HTTP cookie, is a piece of text stored on a user’s computer by their web browser. A cookie can be used for authentication, storing site preferences, shopping cart contents, the identifier for a server-based session, or anything else that can be accomplished through storing text data. A cookie consists of one or more name-value pairs containing bits of information, which may be encrypted for information privacy and data security purposes. The cookie is sent as a field in the header of the HTTP response by a web server to a web browser and then sent back unchanged by the browser each time it accesses that server. As text, cookies are not executable. Because they are not executed, they cannot replicate themselves and are not viruses. However, due to the browser mechanism to set and read cookies, they can be used as spyware (see zombie cookie and evercookie for more details). Anti-spyware products may warn users about some cookies because cookies can be used to track computer activity—a privacy concern, later causing possible malware.”
from http://en.wikipedia.org/wiki/HTTP_cookie

So the whole discussion can be reduced to the cookie discussion. Well any website uses cookies to enhance the websites usability. This does not mean that I think there is no problem. but please be realistic. If you browse a web shop the shop – at least if it is a professional one – will save information about your browsing behavior. Even though you can be recognized by the cookie the whole process is still very anonymous. Once you delete the cookie (and Criteo gives you the explicit possibility on their website) retargeted ad’s cannot reach you because you won’t be recognized. The only thing Criteo will probably still save about you is your browsing behavior on that very shop you visited in the first place. This data is not linked to your name or anything that could identify you.
The privacy of this service is much higher or better than Facebook. So if you are using Facebook without fear you shouldn’t be afraid of Criteo’s retargeting advertising system.

How will this change the online ad market?

Google could easily install a similar ad system. There are probably several good reasons not to do it.

• Adsense is running very good and Google has the competitive advantage of being market leader.
• Customers have to be on your web shop first before you can retarget the product.
• Due to the more efficient advertising conversion rates will probably rise. If the cost for the advertisement stays constant the publisher (Google and their publishers network) would loose on its profit margin.

The last one is exactly where I see a competitive threat to the Googleconomy. The advertising is more efficient. If I was an advertiser. i would most certainly give it a try. The problem with this system is that it is hard to use with new products.
The whole discussion leads to the question why doesn’t Amazon install a similar system? They have a huge knowledge about customers interest and a wide network of publishers in their partner program. It would be easy to deliver highly targeted ads and improve the user experience and conversion rates of their affiliate program. I guess Amazon is concerned about privacy. Also Amazon is the market leader. So obviously they are not doing to many mistakes.
What is your oppinion about this startup and their product?