Behavioral Targeting Triggers New Growth Spurt for Online Ads

If 2004 is recognized as the year search engine marketing became the catalyst for online advertising growth, 2005 should become the year when behavioral targeting emerges as online marketers' favorite toy. Once considered the underbelly of online advertising and forced to maintain a low profile because of privacy concerns, behavioral targeting is now emerging as one of online media's fastest growth categories as privacy concerns have been rectified and marketers and media buyers recognize the enhanced ability to generate improved click-through rates (CTR), conversion rates and cost-per-thousand (CPM) efficiencies.

As reported in Jack Myers Report last month (see JMR 7/29/04), the increased availability of analytic technologies is making behavioral targeting one of the fastest growing categories of online advertising. For online publishers, web analytics is providing a new storehouse of Internet and individual website usage patterns that enables enhanced targeting of advertising messages. Online marketers and agencies gain greater insights into the interests of their best potential customers, optimize their reach and gain maximum cost efficiencies. As behavioral targeting becomes a priority for marketers and online publishers, ad placements based on consumer usage patterns is expanding beyond optimization within individual websites to optimization across networks of sites.

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AOL's acquisition earlier this summer of online network Advertising.com, which comScore Media Metrix identified in June as the largest website network, increased industry focus on the category. Today, Advertising.com is releasing its first major research report on the effectiveness of behavioral targeting since the AOL take-over. Advertising.com does not create specific user profiles based on the types of sites a user visits, but instead "tags" a visitor to a specific site or page within a site and delivers ads to that user as he or she travels to other sites within the Advertising.com network. This network consists of advertising inventory purchased by Advertising.com from web, search engine and email publishers. Using proprietary behavioral targeting technologies, Advertising.com promises to generate enhanced results for marketers and the new research being released today reinforces that results can, in fact, be enhanced through targeting techniques.

The five-page report, called Behavioral Targeting: Improving Campaign Performance through Customized Behavioral Segmentation is available by contacting Rob Leonard at Advertising.com (410-244-1370 x11143 or rleonard@advertising.com).

It concludes behavioral targeting can significantly improve campaign performance based on the results of studying three advertisers whose results using traditional targeting techniques were compared to behavioral targeting techniques. "While demographic targeting allows advertisers to reach users based on pre-determined profiles, behavioral targeting allows advertisers to target campaign delivery based on real-time user behavior. By targeting campaign delivery based on anonymous user behavior, higher click-through and conversion rates were achieved, as well as more effective cost-per-thousand impression rates," says the report.

The goals of the three advertisers, respectively, were to drive visitors to the advertiser's website to complete a registration form, to generate sales using a valid credit card, and to acquire new customers. In the first case, Advertising.com identified users who visited the advertiser's registration page but did not complete the registration form. Using Advertising.com's "LeadBack" technology, they targeted specific ads to those individuals as they visited other sites within the Advertising.com network, seeking to drive users back to the advertiser's registration page. Impressions employing the behavioral targeting techniques achieved a 192 percent improvement in click-through rates and a 167 percent improvement in conversion rates. The CPM for behaviorally targeted impressions was $3.98 compared to average non-targeted CPM of $1.49.

For the second advertiser, Advertising.com identified users who visited the website but did not make a purchase. Conversion rates for behaviorally targeted impressions improved 2,232 percent over standard impressions. The third advertiser targeted users who visited a home page but did not sign up for a service offered. Customized creative messages were used to bring users back to the advertiser's site, resulting in an improvement of click-through rate by 225 percent over non-targeted impressions and improving conversion by 3,130 percent.

24/7 Real Media, Tacoda Systems, Revenue Science, Claria, Avenue A, Omniture, HBX, DoubleClick and other companies are engaged in one context or another in delivering online analytic data to enhance the efficiency and effectiveness of online ad campaigns. Revenue Science's Audience Search™ service combines behavioral targeting with search-based targeting, enabling advertisers to select relevant words and track web visitors who have recently visited web pages that contain those terms. Revenue Science groups the visitors into audience segments and scores them by reach and degree of relevance. Ad messages are placed in specific areas of sites where they're most likely to be exposed to interested users.

An executive at Claria told Jack Myers Report "we are a step beyond search. In the search scenario, a consumer chooses the site they visit. That's when we come in. They have self-identified their interest, and now we track them elsewhere on the site. For example, once we know they are looking for digital camera ads, we can deliver targeted ads anywhere they visit on the web. We can deliver ads on a timed basis after someone leaves a site, deliver an ad for a DVD Club to any consumer who purchased a DVD player in the last 60 days, and even sequence creative messages to be delivered over a period of time."