Online display advertising has always been assumed to operate at a different end of the ‘purchase’ funnel to search. Research shows that it increases awareness and purchase intention and makes search campaigns more effective, and although it generates conversions, search has always been the discipline that delivers the lowest cost per acquisition because it’s based on user need rather than advertiser assumption. But the ‘conversion gap’ at the sharp end of the purchase funnel could be closing due to ever more spohisticated forms of online advertising targeting.
80% of online publishers now offer some form of targeting on their site and as advertising revenues have fallen in the recession, their focus has increased on offering ever more targeted offerings to improve ad effectiveness and therefore increase the proportion of digital budgets spend on online advertising.
The most common forms of targeting is geographic – with services now available which allow advertisers to focus down to postcode level - and contextual, with advertising served based on the content on the page (Google’s Adsense is a good example of this.) These are followed by demographic targeting and ‘time-based’ targeting. The least offered is behavioural targeting – which promises to be the most effective but also the most controversial.
Behavioural targeting uses an individual’s web-browsing behaviour, such as pages visited or searches undertaken, to determine which ads should be displayed to that individual. When behavioural targeting is combined with other data held on that individual – be it demographic or geographic – the results can become even more targeted and deliver some quite amazing results.
For example, Specific Media, one of the largest and most capable networks, offers combined demographic, geographic, behavioural, contextual and retargeting across its 2.2 million sites, enabling it to reach the most niche target audiences for its advertisers.
Or take the service offered by Struq. By combining user data, browser behaviour and artificial intelligence, Struq delivers a ‘totally personalised’ ad in terms of both content and audience. In its online demo a generic jobsite ad is transformed into a highly personalised one displaying content precisely relevant to vacancies that the indivudal had previously clicked on. Struq claims that its system reduces costs per acquistion by 60%, increases revenue per user and delivers customers at a lower CPA than search.
However, behavioural targeting faces barriers to continued growth based around privacy concerns on both sides of the Atlantic. Although targeting firms claim that the information gathered is totally anonymous, that hasn’t stopped services such as Phorm from running into difficulties in the UK. The problem seems to lie not so much in the principle of data being collected on users, but the amount which is collected.Phorm operated through ISPs, using a method known as ‘deep packet inspection’ to analyse the content of web pages requested, and built up a complete browsing history of an individual in a way that a publisher or advertising network couldn’t. This led to objections to the UK Government from the EU which effectively forced Phorm to exit the UK market.
Conversely, Google’s own ‘interest-based’ advertising, which collects data on user browsing habits on all sites which service AdSense advertising, has attracted very little controversy.
In theory, behavioural targeting offers individuals on the web what they want – more targeted offerings based on their own taste, interest and preferences. Although studies have shown that many consumers are strongly against data on them being collected in such a covert way, they also show that once the principle and anonymous nature of these services have been explained, consumer sentiment improves. For those who object strongly, there is always the option to delete their cookies, meaning they cannot be targeted and tracked by publishers and ad networks although the danger is that the more that become aware of this, the less effective this method of targeting will become.
And with the erection of paywalls threatening to undermine the ‘free to all’ nature of the web, behavioural targeting may be one necessary evil that consumers are prepared to tolerate in return for access to free content. If that is the case, it’s good news for advertisers.