Data-driven Ad Exchanges: The future or the industries undoing due to privacy concerns?

Ad Week’s Beefing Up Banner Ads article touts data-driven online advertising exchanges and the “saviors” to the world on online display advertising.  It’s interesting that online display (still growing nicely) is labeled as a “failure” when compared to search.  There is not doubt search changed the game and provides a terrific ROI.  However, display has often been discounted even though many studies have been done now to show display actually improves performance of online search campaigns as well as organic searching volume for promoted brands  (see earlier post).  Additionally as a brand driving vehicle, there is no doubt that display is far superior to search.  The Internet has been forced to take marketing crumbs that fall from the table and as a result has been pigeon holed as a direct marketing vehicle, but as more brand-driving media (like TV) lose share to the web, display and online video as branding tools will continue to evolve.

My prediction on exchanges is that premium publishers will not commit to them until such time as far more transparency is presented including what fees the exchange is taking, a full disclosure conflicts of interest the exchange may have, and full transparency on media allocation and decision ad delivery making formulas.

My fear on exchanges is that congress, once we get through the financial crisis and health care reform, will naturally turn its focus to the privacy concerns that data targeting presents online.  We don’t yet have the transaparency on a B2B level required to make exchanges work.  We certainly don’t have the transparency (or understanding) required on a B2C level.  I’m not talking about and opt-in process whereby the fine print of some user agreement adequately achieves CYA legalese either.  I’m talking about passing the “grandmother test”.  Is the targeting that is taking place obvious and simple enough for my grandmother to understand (or better still, your average congressman)?  Until it is, I’m afraid that dog won’t hunt (for long) before it’s put on a congressional short leash.