In Spite of ROI, Senior Execs Say they’re Holding Back Millions Due to Lack of Consumer Trust
TRAVERSE CITY, Mich. – A new study of 90 organizations actively engaged in online marketing concludes that in spite of an acknowledged return on investment, hundreds of millions of dollars are being held back from online behavioral advertising (OBA) over concerns that a lack of consumer trust in the practice could damage brand reputation.
The study, Economic Impact of Privacy on Online Behavioral Advertising, conducted independently by the Ponemon Institute, found that although 70 percent of companies agreed that behaviorally targeted advertising substantially increases marketing and sales performance, and in spite of an overall favorable return, most companies surveyed have limited their online advertising budgets over privacy concerns. In fact, extrapolated results suggest that budgets would be as much as four times higher if not for these concerns.
Among the study’s noteworthy results:
98 percent of companies surveyed said they have restricted OBA because of privacy concerns;
63 percent of companies surveyed rated OBA as their most effective form of marketing; and,
Overall, companies surveyed reported under-spending on OBA budgets by 75 percent due to privacy concerns.
For the 90 companies benchmarked, the total amount not spent on OBA was $604.9 million.
“These numbers are disconcerting both in terms of the percentages and the potential economic impact,” said Dr. Larry Ponemon, chairman and founder, Ponemon Institute. “These data clearly indicate that, in spite of a belief that behavioral advertising is their most effective marketing channel, companies are holding back hundreds of millions of dollars from online marketing simply because of a lack of confidence that privacy concerns can be overcome”
As a result of the findings, the study concludes that companies are clearly concerned with the protection of consumer privacy and are sensitive to consumer unease with online behavioral advertising. The study recommends that advertisers, regulators, and privacy advocates work together to better address privacy concerns through improved disclosure models, consumer education, effective consent mechanisms and deployment of enabling technologies.
“If you can diminish the privacy concerns, money will flow into online behavioral advertising,” said Michael S. Zaneis, vice president for public policy at the Interactive Advertising Bureau in an article that appeared in the New York Times Bits section. “It would be a lift for the entire industry.” That article appears here: http://bits.blogs.nytimes.com/2010/04/30/privacy-concerns-limit-online-ads-study-says/?src=busln
The Study, Economic Impact of Privacy on Online Behavioral Advertising, surveyed senior marketing executives from 90 organizations, representing 14 industries and with average annual revenue of $3.14 billion, operating in the United States. For a free copy of the study, please visit: www.ponemon.org.
About Ponemon Institute
The Ponemon Institute© is dedicated to advancing responsible information and privacy management practices in business and government. To achieve this objective, the Institute conducts independent research, educates leaders from the private and public sectors and verifies the privacy and data protection practices of organizations in a variety of industries.