05/16/2012 03:16 EDT | Updated 07/16/2012 05:12 EDT

Be Glad You're the Target of Online Advertising

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2012-05-16-onlinead.jpgLater this year Canadians will see a change happening with online advertising: the introduction of a small icon on the ad that tells consumers they are being targeted and gives them the ability to opt-out. This move follows the successful introduction of the same opt-out notification system currently live in the U.S. It is excellent for Canadians that this will now benefit them too.

Advertising is a critical component of the online ecosystem, the engine if you will that through its constant injection of capital pays for all the things we like to have but don't want to pay for with real money.

Take Facebook as an example. The individual registered members have access to a site that provides them a benefit that they don't get elsewhere -- to some that is a communication tool, to others, it's an email account or perhaps an outlet where they can express their desire to share. Facebook isn't a charity; they are providing this functionality because it gives them an audience they can monetize with advertising (making the members the product, not the customer).

What consumers don't often realize is that media prices have declined sharply, making it harder and harder for sites to make revenue. They could saturate their pages with more ads but that would diminish the user experience, and so they look for ways to raise the value of each placement.

A successful way of doing that is by providing better targeted advertising based on information known about consumers -- that could be their logged-in data (where they live, their age, their gender, etc.) or it could be their behaviours (what pages did they visit, what products did they consider, what searches have they done).

This type of advertising is made possible by the use of cookies -- small pieces of harmless code that sit on your computer and assign a unique, but anonymous ID number to you.

So the stuff you like is free because of advertising. Advertising only works as an economic model because of better, more relevant forms of it, and that can only happen because of cookies!

Consumers should be embracing cookies then, but instead give them a bad rap because of misinformation and a general lack of understanding. And we have to be honest; there have been cases where companies have done unscrupulous things that give everyone a bad name.

So I embrace the move to adopt the opt-out icon in Canada to give consumers the choice, and to tell them this sort of thing is happening.