SCOTT LIPSKY WEAVES his way around the Dell and Gateway computer boxes scattered in the narrow corridors of his Seattle office, sidestepping employees as they zip past. Others might be overwhelmed or unnerved by the bustle, but the start-up atmosphere is old hat to him. A few years back, as an executive at Amazon.com, Lipsky oversaw the rise of the Internet's most celebrated e-commerce company. Sixteen months ago, he and four others started Avenue A, a media and data marketing firm that's quickly grown into an 85-person company that is the buzz of the Internet advertising biz. "The basic technology and approach is the same as everyone's," says Jim Nail, a senior analyst at Forrester, citing competitors such as Adknowledge and MatchLogic. "But [Avenue A] knows how to get the information. You get a lot of crap, and you have to do a lot of manipulating and massaging to make it mean anything. These guys know how to do it."
While many companies and ad agencies continue to rely on the ancient form of measurement known as "click rate"—the number of clicks on a banner ad through to the advertiser's home page—Lipsky has introduced a system that provides hard numbers on Web surfers' browsing habits. Avenue A sifts information on users' journeys through the Web and reports to its clients—which have included Eddie Bauer, Toys R Us, and more than 40 others—not only whether a consumer clicked on or purchased something on a site, but enough about how the user got there, and where else he or she has been, to give clients valuable information on customers and Web window-shoppers.
Avenue A does its data dicing in what Lipsky calls a "dark data center"—a cramped area in a South Seattle warehouse that is home to more than a dozen humming computer boxes, some with the names of Simpsons characters taped on them. Various servers on the network register and regulate the movement of users; others serve as conduits for this information; and others store the data.
Lipsky says he and his colleagues developed this technology a year ago, after using other systems that they deemed untrustworthy. Based on what he calls "Return on Investment Metrics," Lipsky's approach can deliver a client specific information about its ads, including the "cost per click," and information on the tastes and Web-viewing habits of people who see the ads.
Lipsky is quick to dismiss the thorny privacy issues people raise over this kind of data acquisition. He points out that most e-commerce companies post detailed privacy statements on their sites. And he says that while Avenue A plants cookies on users' hard drives, it doesn't identify Web surfers by name, credit card number, or any other type of personal information. "There's more privacy on the Internet than there is in traditional retail," he claims.
Avenue A cofounder Mike Leo, given to striking visionary poses, says that not only do advertisers value the kind of information he gathers, but so will consumers. He foresees the day when techniques being honed on the Internet will migrate to other media. Digitally interfaced televisions, he says, will play different commercials depending on who's watching. By applying to television the type of data marketing that is emerging on the Internet, advertisers will be able to broadcast different commercials to a man and a woman viewing the same sitcom in the same house on two different sets.
Indeed, other media are already reacting. In April, the trade group Magazine Publishers of America released a study that for the first time demonstrated how print ads could be held "accountable" in the way Internet ads are by Avenue A. Using A.C. Nielsen household scanners to track magazine reading and subsequent buying activity, the study determined how many readers exposed to certain ads went on to purchase the advertised product. If anything, the study suggests that traditional media fear losing customers and advertisers to the Web. Lipsky and Leo are banking that the Internet's interactivity and information yield will have more and more advertisers migrating from other media, where advertising is still a crapshoot by comparison. It would seem that Forrester's Nail concurs. "Advertisers," he says, "are very frustrated that they spend tens of millions of dollars on ads and don't know what they're getting."