It accounted for $350M in spending in ’06, but behavioral targeting will hit $575M this year, said panel moderator Mary Morrison of BtoB Magazine, and eMarketer says it will grow to $3.8B by 2011. Yes, friends, BT is hot, with many such firms being acquired in recent times — the latest being Tacoda by AOL. Tim Mahlman of BlueLithium, an analytics firm, says his client Hyatt Resorts lowered its customer acquisition costs by 71% with behavioral targeting. Philippe Suchet, CEO of Kefta, the online personalization unit of Acxiom, says BT is needed today because customer acquisition costs are rising so rapidly. “There is no more low hanging fruit.” In addition, he said, “Users are now in charge. We’ve moved away from ‘mass market’.” Behavtargeting Geoff Atkinson, marketing chief at Overstock.com, reiterated that “traffic is just getting so much more expensive to acquire.” His firm started using BT about a year ago. “When a customer first arrives, for example, we log how he or she got there — by a certain keyword, for example. Then, on the next visit, we know that customer and feed them something that’s relevant.” Brent Hieggelke, VP of strategic marketing at Omniture, said when he first joined the firm, his friends thought all this “on-site targeting was hocus-pocus.” But it’s quickly become for real. His firm calls it “automated 1:1 targeting.” The customer hits the site, and their technology builds a profile. “It’s a self-learning predictive modeling engine,” he said. “The optimal content decision can then be sent to the CMS (content management system).” What data is used to select content? “Site behaviors, temporal aspects (such as time of day), environmental aspects, and referrer values,” he said. “This enables companies to quit having those weekly meetings to decide what goes on on the home page.” It now can all be automated, down to the individual. Hieggelke also noted his firm has found that the log-off page is a great place for targeted ads. “Behavioral targeting is bringing marketing back to the marketing world.” A few good questions then came from the audience. The first was “What percentage of users totally wipe out their cookies regularly?” Omniture’s Hieggelke said he’s seen some say as high as 15-30%. “But we find it’s only in the single digits.” A second question related to customers’ concerns for privacy. “We think it’s important to keep a customer mindset,” said Kefta’s Suchet. “Don’t capture too much data — find just what’s relevant to you.” Omniture’s Hieggelke added: “A customer’s name and social security number has no value to us at all.” Suchet added that BT enables campaigns to be “continually learning, changing — you can’t sit still, you must always adjust based on what competitors are doing and so forth.” A final audience question: When building profiles, what data do you use? “Primarily clickstream data,” said Omniture’s Hieggelke, “because that’s easy. But also data from your CRM system, and whatever else is determined to be predictive. Most companies take existing web analystics data and feed that in first.”

Update: To fix a typo in “behavioral” in the title (duh). At least I was consistent — I’d done it in the rest of the post, too! 🙂