Behavioral Ad Targeting Heats Up, But Questions Remain
Companies like Tacoda Systems and Revenue Science have signed deals with dozens of Web publishers to let the publishers serve ads based on users' behavior on their sites. For example, the Wall Street Journal Online can sell a financial services company ads that will reach avid investors no matter where they are on the site. Such targeting gives advertisers better precision in finding their audience and lets publishers charge a premium for ads on lower-priced sections of their site.
Omar Tawakol, senior vice president of marketing at Revenue Science, a Bellevue, WA, provider of behavior-targeting ad services, said targeting eliminates the waste of having an advertiser's message shown to someone unlikely to respond.
"What's interesting about behavior targeting is people qualify themselves for an advertiser's message," he said last week at a meeting of advertising and publishing executives sponsored by Revenue Science and Reuters to discuss the topic.
Randy Kilgore, vice president of advertising at The Wall Street Journal Online, went so far as to predict, "This is the way most, if not all, advertising will be bought online."
Kilgore is not alone in seeing value in behavioral targeting. Reuters recently signed with Revenue Science for its service, which also is used by The Financial Times and CBS MarketWatch. Tacoda, which sells software to publishers, now provides audience targeting to About.com, BusinessWeek Online, iVillage and other sites.
In a further bid to expand its targeting capabilities to smaller sites, Tacoda plans to start an ad network to sell pay-for-performance advertising across multiple sites based on audience segments.
Ad servers are getting into the mix, too. 24/7 Real Media in March announced it would start serving ads based on user behavior tracked across 400 sites in its ad network, and aQuantive has begun a unit called DrivePM to serve ads based on Web behavior captured by its Atlas DMT ad server.
Advertisers and publishers said that behavioral targeting has great potential, so long as the industry has learned from early efforts by Engage and DoubleClick to tie ads to Web behavior. Those efforts failed over privacy concerns and high prices.
"Everybody's interested in it and everybody thinks it's going to be the next big thing but nobody has the operating instructions," said Peter Horan, CEO of About.com.
Andrea Ching, a group planning director at New York interactive agency mOne Worldwide who has dabbled in buying ads based on behavior or audience segmentation, said the jury is out on how valuable the capability is for advertisers.
Though publishers may wish to sell less-valuable site real estate for a premium, Ching said she is not convinced that reaching an active financial trader in the sports section is worth as much as reaching her in the investment section.
"There's nothing that substitutes for reaching someone in a relevant context," she said.
Walker Jacobs, vice president of media sales at Reuters, agreed that context nearly always would trump behavior.
"We need to control the excitement about it," he warned. "I don't know if it's the Holy Grail of online advertising."
Jacobs said internal Reuters studies on behavior-targeted campaigns showed positive results.
The question of its effectiveness leads to problems in how to price it. So far, Ching thinks that publishers offering behavioral targeting charge too much. Tom Lynch, head of online marketing at Dutch bank giant ING, agreed: "The value is certainly TBD."
Horan said publishers would push for pricing near that of contextual ads while advertisers want to spend a 25 percent premium on remnant inventory.
"We're going to end up somewhere in the middle," he said.
Jacobs warned that another threat to segmenting audiences is that publishers face a moral hazard of fudging segments.
"What we worry most about is that we're clearly articulating the value this brings," he said.
"In order for behavioral targeting to grow, there has to be uniformity and some agreement with the audience segments," Ching said.
Publishers and advertisers agree that behavioral targeting must stay mindful of privacy concerns by not tying personal information to Web behavior data.