Digital Privacy’s Generation Gap: Even the Most Innovative Companies Are At Risk

Posted on October 26, 2010 by Comments Off

The Wall Street Journal continues its excellent investigative series on digital privacy with a more-than-a-little menacing look at RapLeaf, one of a growing number of data exchanges being used by marketers to better target ads. By many accounts, RapLeaf is the most innovative in a burgeoning group of companies seeking to hyper-personalize the advertisements presented to online users. But today, there’s a new Journal story that consumers are beginning to delete their profiles on the service.

At first blush, the six-year-old company was doing everything right: It framed its business as, in part, a benefit for consumers; it focused prospects and the industry on its innovative game plan; and it even advocated responsible use of the data it was collecting by calling for Federal regulation of the online advertising industry via the CEO’s personal blog. And things went very well for a long time, including a beneficial reference in a 2009 BusinessWeek issue on “The Future of Tech”.

But this week, the tide is turning. The company is increasingly described as the surreptitious bad guy in a collection of cautionary tales. From the Journal story:

Data gathered and sold by RapLeaf can be very specific. According to documents reviewed by the Journal, RapLeaf’s segments recently included a person’s household income range, age range, political leaning, and gender and age of children in the household, as well as interests in topics including religion, the Bible, gambling, tobacco, adult entertainment and “get rich quick” offers. In all, RapLeaf segmented people into more than 400 categories, the documents indicated.

There has also been cautionary coverage, building in recent weeks, from one of the most respected voices in the technology media – a media segment that was previously a stronghold of support for the company.

RapLeaf is not alone. Gartner analyst Andrew Frank identifies this group of companies as “data providers”, living deep inside what he terms “the digital display advertising ecosystem”. Yes, it’s ironic that RapLeaf is receiving this attention because of its extraordinary business success – its relationship with facebook brought the company to the attention of the Journal initially – but all companies driving innovation in this business segment risk the same level of scrutiny once successful.

Thriving under these circumstances demands three things…

1. Always factor your customer’s customer into your positioning.
As RapLeaf evolved from user-generated ranking system, into “fraud protection” service, and ultimately into aggregated data source, consumers’ mood toward online privacy and targeted advertising shifted. And once the company began getting coverage in media like BusinessWeek, this entirely new (even if it was unintended) audience became aware of the company. At this moment, when readership moved from the tech-savvy, early-adopter, under-35 devotees of Fast Company, GigaOm and the like, to the older, more conservative, less technology-fluent mass readership of BusinessWeek and the Journal, the tone, messaging and focus of the company’s communications needed to broaden as well. And often in these cases, the first mover needs to accept the mantle of educator of these broader audiences. Consider the approach to its Web site taken by BlueKai, a rival service to RapLeaf. BlueKai showcases its consumer benefits with a dedicated landing page and strong advocacy messaging. The information collected by RapLeaf and BlueKai is largely the same, but BlueKai’s positioning of consumer control is much stronger.

2. Provocative trends demand a sober tone as you progress beyond the “safe zone” of technology-enthusiast and early-stage financial media.
RapLeaf’s CEO participated in quite casual, even giddy, communications (see video at end of post), undercutting more business-oriented appearances at conferences and in media interviews. As data collection and digital privacy emerged as increasingly serious topics, all of the company’s communications should have reflected an understanding of that. [Update: The video at the end of the GigaOm post appears to have been deleted, but you can still see it here.]

3. Go all the way with your response.
The perception of transparency is one of the most effective mechanisms to create trust. On the plus side, RapLeaf posted a well-crafted blog entry from the CEO in response to the Journal coverage – repositioning the story and highlighting the types of information they do not collect. However, the company declined to engage with the Journal (or other media) on topics about its business, beyond what was in the post. For a company advocating Federal regulation of online advertisers, such a contradiction can become stark.

Breaking new ground, and bringing true innovations to market, is always difficult. Making your communications work hard for you smooths the path considerably.

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