October 19, 2012, 2:40 PM

How Zappos balances privacy and targeted ads

It aims for more long-term sales by avoiding ads that are too personal.

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Zappos, the online footwear and apparel retailer owned by Amazon.com Inc., No. 1 in the Internet Retailer Top 500 Guide, knows it could spike sales with personalized ads for specific products consumers viewed on Zappos.com placed in online advertising networks, says Darrin Shamo, the footwear retailer’s director of direct and online marketing. 

But Zappos, which has built a reputation for a high level of customer service, prefers not to get too personal—or “creepy”—in the way it markets to customers, he adds. Instead, it will take analytics data it gathers about what customers view on Zappos.com and “dumb it down” through its product recommendation engine to pitch ads for a general range of products a consumer is likely to buy. A shopper who showed a clear preference for a pair of Nike “Free Run+ 3” running shoes in gray and red trim, for instance, may see a retargeted ad for several similar products in multiple brands and styles—but not the exact same Nike shoe she had checked out on Zappos—while later visiting another web site.

“Showing people exactly what they had seen, and producing more targeted ad content always converts better,” Shamo admits. “But we back away from the revenue opportunity for the sole purpose of improving the customer experience. We feel that, long term, we’ll get more customers and more sales.”

If online marketers push ads that are too highly personalized, he says, it’s more likely that federal legislation on online privacy or strict industry guidelines could force more restrictive use of targeted advertising.

“If online marketers do more relevant marketing without getting too creepy, then we don’t need legislation,” Shamo says.

Although pending federal Do Not Track legislation, which would make it easier for consumers to avoid getting tracked online by marketing analytics software, has yet to win much support in Congress, Sen. John D. (Jay) Rockefeller (D, W.Va.), chairman of the Committee on Commerce, Science and Transportation, is expected to re-submit his do-not-track bill next year. 

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