How are personalized ads shown to me by advertisers?

Imagine you're shopping online for shoes. After browsing various stores for the perfect pair, you visit your favorite news site. Suddenly, an ad pops up showcasing the same shoes you were just looking at. 'That's odd,' you think before navigating to a weather site for the weekend forecast. And right between Saturday's sun and Sunday's storm, you spot another ad for those shoes. You're not losing it; you've just witnessed the magic of customized Internet advertising.

Targeted ads have been a part of the online experience since the late 1990s. Back then, companies targeted consumers in a way similar to TV ads: by choosing ads that would likely appeal to a broad audience. For instance, fly fishing shows would air ads for rods and trips to Alaska, so fly fishing websites did the same. But by the early 2000s, online ads became smarter. Companies began tracking browsing habits and using collected data to deliver more personalized ads. That's when promotions for shoes, among other things, started to follow people as they browsed the Web.

Today, custom online ads are everywhere, and people are beginning to notice. A 2012 Pew Internet and American Life Project survey revealed that 59% of Internet users noticed targeted ads while browsing [source: Purcell, Brenner, and Rainie]. While some activists view this as a violation of privacy due to the amount of personal data being collected, advertisers argue that it's harmless. So, which side is right?

How Advertisers Gather Your Data

To serve you personalized ads, companies must first collect some information about you. Below are a few methods they use to gather this data:

Clickstream Data. In custom advertising, the term clickstream refers to a log of the web pages you've visited. This information is tracked through a small text file called a cookie, which is sent from a website to your device to monitor your navigation across its pages (for more information, refer to "How Internet Cookies Work"). There are two types of cookies: first-party cookies, which are from the site you’re visiting, and third-party cookies, which come from other domains that display ads or images on the page. Advertising companies such as DoubleClick use third-party cookies to create detailed records of users' browsing behavior. This allows them to serve more relevant ads. For instance, if your clickstream shows visits to many sports websites, you may see ads for team jerseys and game tickets even when browsing unrelated topics like the weather.

Search Data. A 2011 Pew Internet survey revealed that 92 percent of adults use search engines while online, which is why platforms like Google, Yahoo!, and MSN have entered the advertising space [source: Purcell]. These platforms analyze your search queries and browsing patterns to display targeted ads alongside regular search results. They even allow companies to pay for higher placement in search results for specific keywords. This explains why, after searching for "sleeping bags," you often see large outdoor brands at the top of the results and ads for sleeping bags along the sides of the page.

Purchase Data. Have you ever noticed how websites like Amazon suggest products based on your previous purchases or browsing history? This happens because online retailers track your purchases using cookies or account registration data, including items you’ve added to your cart but didn’t buy, in order to customize your shopping experience.

Profile Data. When you create a profile on a social platform like Facebook, you're likely to share details about your age, religion, education, political beliefs, hobbies, and favorite entertainment, allowing friends to learn more about you. What you might not realize is that these sites also use this information for targeted advertising. For instance, if you mention an interest in "board games," don’t be surprised to see ads for games like Scrabble, Monopoly, or Life.

Does custom advertising invade privacy?

It's no surprise that Internet users have raised concerns over how marketing companies use personal data to deliver custom ads. These companies gather vast amounts of information from millions of people worldwide and use it to target ads, sometimes making it feel like someone is peeking over your shoulder as you browse.

A major point of contention lies in the use of third-party cookies, which allow for the creation of detailed logs of users' browsing habits. Critics worry that these records could be combined with personal details like names, addresses, or phone numbers. While such a scenario is unlikely—marketing companies tend to avoid practices that could provoke backlash—it’s understandable why some users are uncomfortable.

Although third-party cookies have received some criticism, most cookies are completely harmless. Many people mistakenly think that cookies are malicious programs capable of planting a virus on your computer or stealing personal data from your hard drive. In reality, cookies are just simple text files that can only be accessed by the website that created them. They are typically used for harmless tasks like remembering your preferences on a specific site. Even Mytour.com uses cookies!

If you're still concerned about cookies and data collection, consider this: Advertising revenue supports the free access to many websites. Marketers argue that by sacrificing a bit of privacy, you’re essentially paying for the ability to browse without paying a fee. Without targeted advertising, ads would be less relevant and less profitable, which could lead to websites charging for access. At least custom ads tend to offer things you might actually want, instead of pushing products you’d never consider buying.

If you’re still uneasy about all of this, don’t worry: you can disable cookies in most web browsers. Just head to your browser’s preferences under the "security" or "privacy" tab. For a more extreme approach to limiting data collection, you could avoid things like internet searches, online shopping, and social media altogether. But then, what would you do for fun?