...Google, however, has been very reluctant to use all this data in its advertising business. One reason is that it has other information that solves its main problem: picking the right ads to show on each page. It uses what people are searching for on its search site and the content of other pages on which ads appear (including, of course, the content of messages displayed in Gmail).

But as Google gets bigger it is tiptoeing into using more data for targeting. It tries to determine the location of users in order to show ads of local businesses. It also gets some personal information about users from partner sites on which it displays ads — like MySpace — to help it choose ads.

And Google has now started dipping its little toe into the pool that Madison Avenue calls behavioral targeting. That approach is based on the idea that the best way to pick an ad to show you now is to look at your online activity from a few hours or days ago. The classic example is showing car dealer ads to someone who searched for minivans yesterday. ...   more »