Front Porch Says Competitors Over Promise Behavioral Ad Revenue

Yes, you can earn money from serving ads based on your customers' web behavior, but not as much money as some vendors claim, and not immediately.

by Gerry Blackwell [May 29, 2008]

Zach Britton, founder and CEO of Front Porch Inc., sounds a bit defensive when he talks about the hot potato topic of behavioral ad targeting on the Internet. But Britton defends himself pretty well.

His company was one of the first to offer ISPs the opportunity to participate in, and earn revenues from, behavioral targeting. Its PorchLight appliance sits at an ISP's point of presence and can, among other things, track individual users' web surfing behavior—"anonymously." This information is used to tailor selection of ads to display on pages the user later visits.

Behavioral targeting has taken a beating in the mainstream media lately, though, with privacy advocates crying foul.

"There has been a lot of just egregiously negative press," Britton says. "Sometimes with really good reason. The early steps [in behavioral targeting] have been painful. We've taken a go-slow approach now—not because of any technology issues, but because we think we need to make sure subscribers are okay with this first."

The irony is that while Front Porch has been closely identified with behavioral targeting—it's one of the pioneers, in fact—the ad-related applications are not the original purpose or even the main use of PorchLight.

Britton, a former ISP owner himself, developed PorchLight (at a cost to date of $55 million, he claims) to provide a simple, effective way for ISPs to communicate with subscribers in real time, to send alerts on system outages and other issues, for example. Messages pop up in the subscriber's browser when they log in.

The messaging product, not the behavioral ad targeting, is the company's "core business," he insists.

"I readily admit that our website may be a bit confusing. [Behavioral targeting and messaging] are two different businesses. Our revenue bread and butter is the standard messaging services. People sometimes conflate the two—but they're very different product lines."

Britton may sound like he's trying to distance himself from behavioral targeting. He also warns that competitors are grossly exaggerating the short-term revenue potential for ISPs. Some tell ISPs they could make as much as $5 or $6 per month per subscriber.

"It sure ain't happening tomorrow," Britton says. "We've been doing this longer than anybody, so we should know. Even if you do it really aggressively, it's going to take awhile [to get to those revenue levels]."

He estimates closer to $1 per subscriber per month, and it may not be that high yet for many ISPs who participate. But Britton believes that within four to five years, as advertisers come to understand the power of behavioral targeting and they—and consumers—sign up to participate, revenue shares for ISPs could grow to be significant.

And he's really not making apologies for the company's ad-related offerings. It's just that he would rather under-promise to ISPs on the revenue and over deliver. Also, as he says, the customer is always right, and no ISP can afford to annoy subscribers. The risk for ISPs is that customers will object to behavioral targeting on principle.

"Your ARPU is zero if the customer walks," Britton points out. "Even if you're totally in the right and they just don't understand, you're still in the wrong."

Are subscribers and privacy advocates in the wrong on behavioral tracking? Here's how it works.

The Front Porch appliance tracks where an individual subscriber surfs. If you surf to certain sites or types of sites—such as the Kelley Blue Book, a source of information for new car buyers—it takes note, and may even note, in the case of a Kelley visitor, that you looked at SUVs.

Then the next time you—or anybody using your computer and browser—visit a site with ads served by a Front Porch partner, you'll see an ad from GM for one of its new SUVs instead of the default ad or a randomly chosen one.

The argument to advertisers is that ads targeted in this way are more likely to be noticed and followed up. That increases their monetary value. If the value of a single impression from an untargeted ad is a fraction of a cent—for a single user visiting a site where it's displayed—a targeted ad might be worth one or two cents, Britton says.

It's that incremental increase in advertising revenue that ISPs share in behavioral targeting programs such as Front Porch's. It will take a critical mass of many consumer participants, plus advertisers being convinced of the benefits of behavioral targeting, before revenues start to flow for ISPs. Which is why Britton cautions that it will take time.

Behavioral tracking, at least as practiced by Front Porch, doesn't associate behavioral data with personally identifying information. In fact, Britton insists that if he were ordered by a court to disclose information about a user's browsing behavior, he couldn't comply. The technology simply associates a numeric value, indicating a type of behavior—not actual websites visited—with a device and browser.

And this only happens when the behavior is of interest to advertisers. As Britton notes, "None of us is really that interesting on a day-to-day basis. It's not like we buy a car every month or anything."

Go to page two: There are rewards for good behavior