Behavioral Targeting Spurs Golden Age
The late 1990s saw the Bronze Age of ad networks. Back then, ad networks were all about massive reach and cheap cost-per-thousands. But in the past few years, a new age has emerged based on a different paradigm of how to target people with advertising.
For most of the 150-year history of advertising, the story went like this: You make widgets. Your media strategy consists of figuring out who's likely to buy widgets, calculating where you can reach them and putting your ads into that environment.
The "calculation" part involved placing your widget ad in the right contextual environment, such as Widget.com and WidgetsMonthly.com. "Fish where the fish are," as they say. If you were lucky, you got it right. The right person saw the ad and bought your widgets.
Now there's a better way. Say an ad network serves ads to 100 million unique users monthly. For each one of these users, points are assigned to the things they do online. This includes: The ads they see but don't click on; the ads they click on; the links they click on; and the subject matter of the pages, sections and sites they visit.
Each user remains anonymous. Points are assigned to a tracking cookie, not to John C. Smith. Over time, the points add up to form a behavioral profile of each unique user (or at least of their tracking cookie).
So we know that one user is mostly interested in extreme sports and not at all interested in cooking or getting a degree in their spare time. Another user is extremely interested in day trading, but not at all interested in gardening or sports. Based on this information, we can serve the ad that's most compelling and relevant to that user regardless of the page or site she happens to be visiting. The extreme sportsman and the day trader referenced above could be on the same page of the same site at the same time but be served different ads.
This is basic stuff by now to anyone in online media. But to marketers, especially old-school consumer packaged goods marketers, the idea of focusing ads on the prospect, regardless of content or context, takes some getting used to.
Here's where ad networks add value. This behavioral targeting gets layered with contextual targeting, demographic, geo-targeting and day part, producing click-through and conversion rates that Bronze Age online ad networks couldn't touch, and neither can individual sites or even portals.
You can gather only so much data from the users of one site, and you can optimize a campaign only so much across one site or one portal. The magic of the new online ad technologies takes place when you can distribute it over hundreds or thousands of sites.
As for how marketers feel about behavioral targeting, 36 percent in a study by MarketingSherpa said they got "great results" and 84 percent told the Ponemon Institute that they were "satisfied" or "very satisfied" with behavioral targeting.
Not surprisingly, the future looks bright for behavioral targeting, as a 2006 study from eMarketer claims that spending on behavioral targeting will top $1.2 billion this year and reach $2.1 billion by 2008.
Also, Forrester reports that 83 percent of online retailers say they are using, piloting or planning to use behavioral targeting over the next year. Again, no surprise, since behavioral targeting is the closest marketers can come to providing personal shopping services to millions of prospects at the same time.
It's this new targeting capability as well as campaign optimization technologies that monitor dozens of variables simultaneously and make ad serving decisions in real time that are driving results for marketers, results they can't get anyplace else. The new generation of ad networks is gaining share. And the Golden Age of the network is now. n