By now we all know that if we Google for information about Hawaii or visit HomeDepot.com to research weed wackers, we’ll see ads for vacation packages or gardening tools everywhere we go on the web for a week. It can feel a little Orwellian, and I appreciate the privacy concerns it makes very visceral, but I don’t complain when a perfectly timed ad saves me 20% on the road racing shoes I was going to buy anyway.
It reminds me of the debate over high-frequency trading that Michael Lewis fired up last year when he painted high-frequency trading as a boogeyman with his book Flash Boys. In it he said the market is rigged because super-fast computers are snapping up fractions of a penny per share faster than even the other computers can see it happening. Investing legend John Bogle and others counter the “rigged” claim by questioning whether HFT really affects buy and hold investors since they trade so little, and commissions, fund expenses and market makers’ spreads take much bigger bites out of their returns. Proponents of HFT also say the extra liquidity it provides means lower spreads for everyday investors, which more than makes up for the hundredth of a penny they get paid.
Who’s right? It’s tough to say difinitively, but my point is, it’s very similar to the aforementioned online advertising example. Almost every major web site sells the screen real estate in front of your eyes, no longer to specific advertisers, but to specialized services that find the highest bidder across a sea of advertisers. These services track all of your browsing and searching to create a continuously updated profile of you, along with inventories of ads and the sites where they can be placed. Just like in financial markets, ad exchanges combine this data and use sophisticated algorithms to select the best available match between buyer (source of the ad) and seller (web site). And just like with financial trades, it all has to happen in microseconds – slowing down web response time to wait for ads is not acceptable to anyone.
As consumers, we’ve been trained to accept that all the free goodness on the web is paid for by advertising. And as long as we have to endure advertising, why not have it be relevant advertising we might benefit from? It’s a clear win for the advertiser, for the site displaying the ad and for us. It’s true that most of us find the idea of advertising annoying – until it happens to be about something we care about. Ads about things we’re actively interested in can be as relevant and valuable as any other content, and in fact far more useful than a lot of the things our friends have posted on Facebook.
One of our customers, Valassis Digital (formerly Brand.net), provides exactly this kind of digital ad platform. They chose Solace because it delivered the speed and reliability they needed to help make the ads displayed across hundreds of the top websites smarter about matching people and relevant services.
In the end, the multi-faceted debate about the pros and cons of algorithms (in trading or advertising) reminds me of the argument about whether watching sports is a much-needed escape from day-to-day headaches and a powerful group bonding experience or a complete waste of time – it’s possible for the answer to be yes on both sides of the issue.