Using Credit Cards to Target Web Ads

The two largest credit-card networks, Visa Inc. and MasterCard Inc., are pushing into a new business: using what they know about people’s credit-card purchases for targeting them with ads online.

Their plans, if implemented, would represent not only a technological feat—tying people’s Internet lives with shopping activities—but also an erosion of the idea of anonymity on the Web. It’s an effort by the two companies to profit by selling access to the insights they gather about people with every credit-card transaction.

The technology is still evolving. According to ad executives briefed on some of the ideas, a holy grail would be to show, for instance, a weight-loss ad to a person who just swiped their card at a fast-food chain—then track whether that person bought the advertised products. Currently, Web ads generally are based on a person’s online behavior but not information tied to his or her identity or activities in the brick-and-mortar world.

In one particularly futuristic idea, a Visa patent application published this year describes incorporating information from DNA databanks, among other personal details, into profiles that could be used to target people online.

MasterCard earlier this year proposed an idea to ad executives to link Internet users to information about actual purchase behaviors for ad targeting, according to a MasterCard document and executives at some of the world’s largest ad companies who were involved in the talks. “You are what you buy,” the MasterCard document says.

MasterCard doesn’t collect people’s names or addresses when processing credit-card transactions. That makes it tricky to directly link people’s card activity to their online profiles, ad executives said. The company’s document describes its “extensive experience” linking “anonymized purchased attributes to consumer names and addresses” with the help of third-party companies.

MasterCard’s proposal would have unleashed detailed insight into people’s lives that is largely not available elsewhere. “There is a lot of data out there, but there is not a lot of data based on actual purchase transactions,” said Susan Grossman, group head of media solutions at MasterCard Advisors, in an August interview. “We are taking it a level deeper…it is a much more precise targeting mechanism.”

MasterCard, which confirms its document was shared with at least four companies, now says it has “put aside” that idea because of restrictions over how financial-services companies can use customer data. The company says the document was created in April for “exploratory conversations.”

It now is pursuing a plan to sell marketers an analysis of anonymous, aggregated data sorted into marketing “segments,” such as people with a high propensity to be interested in international travel. MasterCard said its plan is “completely new to the industry” and that it still is working through the details of how it will work.

Visa is also currently pitching the ability to use cardholders’ anonymous buying histories, in aggregate, to tailor the ads people see online, according to an ad executive who discussed the plan with a Visa official recently. That would let advertisers, for instance, show cat-grooming offers to people in one area, and dog-grooming ads to people somewhere else, based on the group buying behavior in the areas as a whole, the ad executive said.

According a Visa patent application published in April, the company sees potential to use a wide array of personal details to create profiles that could be used for ad targeting well beyond shopping details. It describes the possibility of also using “information from social network websites, information from credit bureaus, information from search engines, information about insurance claims, information from DNA databanks,” and other sources.

Both companies say their plans are preliminary. A spokeswoman said in a statement that Visa “is continuously assessing its strategies including ways trend data could help create more effective online advertising.” She said the company doesn’t discuss “Visa’s intellectual-property strategies.”

Earlier this year, Visa unveiled a program to let retailers, including Gap Inc., send text messages to people who agree to receive real-time discounts based on their transactions.

Visa and MasterCard—which process electronic payments but don’t issue credit cards—possess some of the world’s largest databases of sales transactions. Visa processed 45 billion credit- and debit-card transactions in the year ended September 2010, according to a company presentation. MasterCard says it collects details about the 23 billion transactions it processes per year, including date and time, dollar value, and the merchant’s name and address. The company aggregates the data and analyzes more than 4,000 anonymous spending behaviors.

People can remove their information from MasterCard’s analysis by providing their card number on the “Data Analytics Opt-Out” page at www.mastercard.us/privacy. A Visa spokeswoman said the company provides consumers with “notice and choice for products that use their personal information.”

MasterCard says it doesn’t collect card-holders’ names or contact information in transactions it processes. The company says it doesn’t connect an individual’s Web-surfing activity to their specific cardholder transaction data or provide outside companies with individuals’ transaction data.

A MasterCard spokesman said in a statement its business is based on “the sum of billions of transactions and hundreds of thousands of cards,” making it “impossible for our customers to link it back to any individual cardholder.” The company said MasterCard “never sees” linked data.

Marketers’ demand for detailed information about individuals is at an all-time high. In the past three years, the personal-data business has exploded, with hundreds of companies tracking online behavior.

As a result, basic information about Internet users—gender, age, location, income and interests—is now a commodity, ad executives say. So, to gain a competitive edge, companies are assembling more detailed profiles about people that can include thousands of data points ranging from political interests to marital status. Recently, one online-dating service was found sending information about its users’ “drug use frequency” to an online-tracking company.

The trove of details about people’s credit-card activity would be a gold mine, ad executives say, because it illuminates a person’s budget, where they shop, what they buy and how they spend their time. “The combination of actual purchase behavior with attitudinal and demographic information provides an unparalleled understanding of the consumer,” MasterCard’s document says.

For years, marketers have struggled to balance people’s privacy with their quest to develop robust profiles of Internet users. More than a decade ago the online ad network DoubleClick Inc. bought a business that collected information about people’s names and purchases directly from merchants. It faced a backlash and ultimately sold the business. For a time, DoubleClick’s experience made other companies hesitant to try to connect information tied to a person’s real name, such as home value and number of children, to their online behavior.

Matching Internet users to their real-world buying activity is technically complex and typically requires extensive cooperation between various tracking companies, each possessing different information about people. While it’s unclear how MasterCard might have linked its anonymous purchasing information to Internet users, the plans outlined in Visa’s patent applications offer a variety of scenarios for how a technique might work.

One approach from the Visa documents is based on tracking when a person enters personal information, such as their credit-card number or real name, at a website. That information then is used to look up a broader profile of that user that includes that person’s purchase history based on their credit-card transactions. A small tracking file, called a cookie, is then installed on the person’s computer to target ads at them based on their profile.

The Visa documents also discuss other ways profiles about specific users might be used. Several patent applications discuss tracking whether or not a person who sees an online ad ends up buying the advertised product. One also discusses using the profiles to prioritize the search-engine results that people see.

In August, Ms. Grossman of MasterCard said the company was developing its own methodology, and the details were proprietary. She said the company doesn’t “focus on individual account level transactions” but rather “consumer segments.”

Ms. Grossman said MasterCard’s goal was to create an “inferred link” to an Internet user by comparing MasterCard’s information with that of other providers and “triangulating different attributes.” That would allow the companies to “infer that somebody belongs to one of the groups, based on the fact that they have enough attributes that look similar.”

She said MasterCard was testing its process and found it to be “of very high quality.” MasterCard wasn’t yet working with any outside company but was “in discussions with all the major players in the industry,” she said in August.

MasterCard this month said it does no matching of individual Internet users to their purchase behavior. “Any matching that may have been discussed would have been on the part of the third-party company—not MasterCard,” a spokeswoman said.

The MasterCard spokeswoman also said the idea described in MasterCard’s April document has “evolved significantly” and has “changed considerably” since August. After the company’s conversations with ad agencies, MasterCard said, it found there was “no feasible way” to connect Internet users with its analysis of their purchase history. “We cannot link individual transaction data,” MasterCard said.

Other companies in the credit-card business say they aren’t selling their customers’ buying histories to third parties to target online ads but are exploring other ways of using the data for marketing. American Express Co. says it uses aggregated, anonymous credit-card transaction data to conduct custom research for marketers, but doesn’t share purchasing details with outside companies.

Credit-card issuers including Discover Financial Services’ Discover Card, Bank of America Corp., Capital One Financial Corp. and J.P. Morgan Chase & Co. disclose in their privacy policies that they can share personal information about people with outside companies for marketing. They said they don’t make transaction data or purchase-history information available to outside companies for digital ad targeting.

The next step for MasterCard could be selling its targeting segments to the highest bidder via online auctions. Ms. Grossman said in a September interview that MasterCard has talked with companies that auction data about Internet users, including BlueKai Inc. and Exelate Inc.

BlueKai and Exelate both operate digital exchanges, similar to stock exchanges, that sell billions of data points reaching more than 300 million unique Internet users each month. A spokesman for BlueKai said that the company “doesn’t have an existing relationship with MasterCard.” Exelate declined to comment. MasterCard said it hasn’t yet finalized any plans to sell its information.

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