Remember Google’s interest-based advertising? You know, where they serve you ads based on your browsing history, and allow advertisers to behaviorally target users? It has now rolled out on a mass scale after a two-year beta run. All advertisers can now utilize this targeting.

What do you think about Interest-based advertising? Let us know in the comments.

The way Google’s Interest-based advertising works is that sites that join the Google Display Network (which includes Google’s Display partners, YouTube, and specific Google properties that display Adwords ads), and serve ads to users based on browsing history. Google’s Display Network and Search Network are separate, and combine to make up the entire Google Network, but advertisers have the option of running their ads on the Google Network.

On the Inside AdWords blog, Google Display Network Product Manager Jon Krafcik writes:

We’ve been slowly expanding the availability of this feature, and as of today, interest categories are now available to all AdWords advertisers. It works like this: our system looks at the types of pages a user visits, taking into account how recently and frequently those pages have been visited, and then associates their browser with relevant interest categories. Using these categories, you can show ads to the people most likely to purchase your products or services, and you can reach them across all types of sites in the Google Display Network in addition to contextually relevant sites.

With over 1,000 interest categories from ecotourism to mobile phones, we’re confident you’ll find a category that fits your business. And with over 500 million users interested in these categories who visit the Display Network every day, you’ll be able to reach a huge number of potential customers. You pay only for clicks or impressions at auction prices, as always. Our beta advertisers have used interest categories to successfully meet all kinds of goals, from an advertiser increasing brand lift by 40% to a shoe retailer driving 400% more conversions at a lower advertising cost per sale.

Google claims that the Display Network reaches 70% of unique Internet users around the world. “The Display Network has the advantage of reaching potential customers at different points of the buying cycle,” Google says. “Not every potential customer is focused on conducting a search. Not every visitor is ready to buy at a given moment. The advertiser’s challenge is to capture their attention at the right time. For example, a user might begin a search for digital cameras with just an interest in reading reviews. While reading a review, though, that user might note the ads of online retailers or click on the ads themselves. With search-only advertising, this customer would have been missed.”

The addition of interest-based advertising should theoretically help the advertiser in reaching the customer at the right time.

Privacy

Here’s a video Google put out about privacy as it relates to interest-based advertising, back in ’09:

Google users can edit the categories of ads they wish to be shown. I’m not sure the average user will know to do this or even think about it, but Google has a page where you can go and adjust this, or even opt-out entirely. Right now, Google has me set up to view ads from the following categories: celebrities and entertainment news, online video, advertising and marketing, Internet software, Mac OS, search engines, SEO and marketing, business news, politics, and social networks.

While these categories, I would imagine are relevant enough to me, I would hardly say they’re representative of my interests at large or even my web use at large. Google will let us add (or remove) categories, as we like, however. You can add sub-categories from Arts & Entertainment, Autos & Vehicles, Beauty & Fitness, Books & Literature, Business & Industrial, Computers & Electronics, Finance, Food & Drink, Games, Hobbies & Leisure, Home & Garden, Internet & Telecom, Jobs & Education, Law & Government, News, Online Communities, People & Society, Pets & Animals, Real Estate, Reference, Science, Shopping, Sports, Travel, World Localities, and Demographics.

The interests are associated with the advertising cookie that’s stored in your web browser. When you opt out, Google disables your cookie and no longer associates interest and demographic categories with your browser. Your ads are likely to be less relevant as a result. Here’s another privacy video from Google talking specifically about cookies:

On the Ads Preferences page, Google says, “Google is a participating member of the Network Advertising Initiative and follows the industry privacy standards for online advertising. You can opt out of this cookie, as well as other companies’ cookies used for interest-based ads, by visiting the aboutads.info choices page. If you want to persist your opt-out of interest-based ads from all NAI member companies, you can install the Keep My Opt-Outs plugin.”

The “Keep my opt-outs” plugin is essentially a “Do Not Track” mechanism that lets users opt out from receiving personalized ads as they browse the web. More on this here.

Competition

As Facebook becomes an increasingly attractive alternative for online ad spending, Google is smart to ramp up its targeting abilities, although I’m not sure they match the targeting power of Facebook’s. Google’s is much more about timing, which can certainly be effective, but in reality can be hit or miss. Facebook has the advantage of all its users “likes” which can really be far more representative of their “interests” than simply listing somewhat broad categories in their Google settings.

For example, with Facebook Ads, I can create an ad that targets 21-year-old males who live in Lexington, KY, and Like the “It’s Always Sunny in Philadelphia,” the band “My Morning Jacket,” and drink “Pabst Blue Ribbon”. That can be pretty powerful. There’s a reason these ads are gaining popularity, particularly among local businesses. I report from MerchantCircle this month found that 22% of local merchants have used Facebook Ads, and that two-thirds of them would use them again.

Facebook and Google are becoming competitors in more ways than one, but advertising is obviously a key area, as it’s the real money maker for both companies. This also comes at a time as Google’s future in advertising is uncertain. The company is facing multiple antitrust ordeals, including a potentially lengthy investigation from the U.S. Federal Trade Commission and questioning from the Senate Antitrust Subcommittee. Meanwhile, the U.S. Department of Justice is looking into the company’s proposed acquisition of ad optimization firm AdMeld.

The FTC is said to be sending out requests for information from companies that deal with Google, and it will be very interesting to see which companies these include. Google will argue things like “the competition is a click away,” and probably that it’s main competitor Bing (using Microsoft AdCenter, which is also powering Yahoo search advertising) continues to gain market share from month to month. In online advertising alone, Google may also point to an increasingly popular Facebook advertising platform, as Facebook is clearly a force to be reckoned with on the web with its nearly 700 million registered users (yes, the number is disputed, but there’s not denying that Facebook is an enormous force).

Is interest-based advertising good for the web? Tell us what you think.