In class, we learned of the evolution of web advertising. At its inception, web advertising was based on an impression technology, with rates being a function of a fixed number of times the ad was shown. This technology was then replaced by keyword-based advertising, which uses a cost-per-click (CPC) model as opposed to a cost-per-impression (CPI) model. Differential bids in a Generalized Second Price auction (GSP) ultimately determine prominence (i.e. order in a search engine) of queries; for example, our textbook indicates that the highest spot for the query “calligraphy pens” will set the advertiser back about $1.70 per click on Google. Almost all major search engines have adopted this style of auction to stratify spots; thus, all search engines essentially create markets to determine advertisers’ prominence of queries.

This article suggests that ordinary keyword-based advertising is evolving again, as Microsoft’s MSN seeks to compete with Google’s AdWords through customer profiling. MSN gathers data on its users and uses such data to place them into demographics. Specifically, MSN’s AdCenter analyzes an individual user’s regular search preferences and predicts what specific keywords the user is most likely to search to ultimately come up with click-through rates. In doing so, advertisers can then specify how much they are willing to pay for a demographic and have certain market segments excluded from query searches.

There was some concern that this form of demographic targeting would be in violation of privacy regulations. However, it appears legal, for IP addresses are not traced and the AdCenter does not provide advertisers “with any data that can be traced back to a specific person,” but rather just a demographic. Even certain data such as household income are not personally identifiable; MSN believes that such data would be invaluable to advertisers seeking to segment markets.

*This article was written in late 2005. Presumably, much has changed given Microsoft’s close ties to Yahoo and Google’s ever-evolving technologies. Nevertheless, I found the article to be quite relevant, for it bulds upon the concept of keyword-based advertising with the additional layer incorporating demographic targeting. I hope to find another article for a future blog post on any updates of this advancement.
Mills, Elinor. “MSN Takes on Google AdWords.” CNET News. 26 SEP 2005. The New York Times. 8 Apr 2008 <http://www.news.com/MSN-takes-on-Google-AdWords/2100-1024_3-5881650.html>.