What  obvious facts does facebook know about you?

• first of all the interests from your  profile
• who your friends are
• The interests of your friends.

This is already very strong and combined with artificial intelligence will lead to amazing service like friend recommender and highly personalized advertising systems

What not so obvious facts does Facebook know about you?

It is akward that almost no one is aware of the fact that you don’t have to fill out your social networking profile or have friendships to tell facebook your interests (I don’t have friends on facebook and the friend recommender works) . Facebook knows:

• Who you communicate with and how frequently.
• What you are really interested in (you constantly tell facebook by clicking on things and visiting profiles and pages!)
• which people your really know (being tagged together in a lot of fotos is a strong indicator!)
• What websites you surf on (there are like buttons everywhere! and most the time you are still logged in with facebook) it is like criterio
• In which geographical regions you login to facebook
• How many people are interested in you and if you are an oppinion leader

The boldest part is how facebook uses all the knowledge about useres and brands to earn money by just enabling people to communicate

Summeray of the Data trading business model

You run a website that people love and you collect user behavoir and other data they tell you implicitly. This data just needs to define them and their interests. You don’t cara about a name! You make it anonymous just like google serach was for a long time. Now you use this data to create an ad system or anything similar. You can even go out and start selling products your own!

Jumping back in time

I still remember the first days of the internet. You registered on some site and they asked you to fill out an old fashioned survey => very annoying and it was not even helping to earn good money.

• age
• sex
• income
• children
• education
• choose 3 interests
• what papers do you read
• what tv do you watch

In comparison to the Data facebook and Google collect about you that was really innocent. Comparing those modern companies with their sophisticated approaches and compare it to the pioneers in the online user data business it is incredible to see how the .com bubble could really rise up.

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?