In order to deliver custom ads, companies first need to know something about you. Here are a few ways they gather that information:
Clickstream Data. In custom advertising, the term clickstream refers to a record of Web pages you've visited. This data is collected using a tiny text file called a cookie, which a site sends to your computer so it can track your movements among its pages (for a more detailed description of this topic, see "How Internet Cookies Work"). There are two types of cookies: first-party cookies, which are sent by the site domain in the address bar, and third-party cookies, which come from other domains that have embedded ads or images on the page. Marketing companies like DoubleClick, which advertise on sites across the Web, use third-party cookies to compile surprisingly complete records of users' browsing habits. This information helps them tailor advertising to specific patrons. For example, if a user's clickstream record includes a lot of sports Web sites, he or she may see more advertisements for team jerseys and game tickets, even when viewing something unrelated, like the weather.
Search Data. A 2011 Pew Internet survey found that 92 percent of adults used search engines when online, so it's no wonder that sites like Google, Yahoo! and MSN have gotten into the advertising business [source: Purcell]. They analyze search terms and user habits to place targeted advertising alongside regular search results and often allow companies to pay them for a higher position among the results for particular keywords. That's why, when you do a search for "sleeping bags," larger outdoor companies often appear first, and advertisements for sleeping bags line the margins of the page.
Profile Data. When you create a profile on a social networking site such as Facebook you probably enter information about your age, religion, education, political views, interests and favorite movies, music and books so your friends can get to know you better. What you may not know is that these sites also use that data to provide you with custom advertising. For example, if you list one of your interests as "board games," don't be surprised to see ads for Scrabble, Monopoly or Life.