Is behavioral ad targeting really worth it?

Behavioral ad targeting is the process of predicting who will be most responsive to online ads based on clicks and search behavior. In the mid-90’s, portals and ad networks (primarily Go.com and Advertising.com, respectively), took the first steps in using browsing behavior as a proxy for consumer interest in an advertiser’s products and services. There are many more companies doing it today (and Go.com, after its sale to Disney, is out of the game entirely)*. The whole process has gotten better and smarter. But has it gotten smart enough to earn its keep? 

To understand this type of targeting, keep in mind that these systems are context agnostic. They don’t attempt to judge why more people who viewed a particular sports site and music site shortly thereafter clicked on a banner for car insurance. These systems simply watch and learn.

The promise of behavioral ad targeting is that advertisers will ultimately be able to make ad buys where fewer people may click on ads, but those who do convert to customers far more often. Has that promise come to pass?

An ideal product for this type of targeting is a car. Nearly everyone will want to buy one sooner or later, so the challenge is to talk to consumers when they are in the consideration process. Sure, you can run contextual ads — in other words, run them on a car-centric site, or in online publications that happen to be reporting on cars. That works. But there is far more ad inventory out there, and many people in the market for a car are visiting these other sites, and not car sites. They would never dream of researching their next car online. Contextual ad buys overlook these people completely.

It’s wasteful to advertise in a scatter-shot fashion across sites, but what if the probability of consumers clicking on your car ad could be improved by sprinkling your ads throughout a vast network of sites, and then having the behavioral targeting (BT) system note those sites visited just before one of your ads generates a click?

Which brings us to Jumpstart Automotive Media, which created this microsite to explain BT to potential advertisers. It even provided a case study. Terrific! I’ve been eager to read an example of the huge ROI that modern BT can deliver.

Well, I wasn’t terribly impressed. The case study describes these results:

  • Contextual placements received a 36% higher click-through rate than Behavioral placements
  • The conversion rate on behavioral placements was 42% greater than on contextual placements (conversion is a specific navigation path that takes place on the client’s web site)
  • The cost per action on behavioral placements was 4% lower than on contextual placements

Is it just me, or does this 4 percent reduction in acquisition cost, for all of that extra work, just seem a little … disappointing.

Am I missing something here? Am I missing something period? If you have insights about this case study that have escaped me, or if you have better evidence that behavior ad targeting is really worth the effort, I’d love to hear from you.

* 5/16/2007 Postscript: Today’s New York Times had a good article on the entire field of ad analytics. You’ll find it here, as part of their Small Business special section.

5 thoughts on “Is behavioral ad targeting really worth it?”

  1. Great write-up, Jeff. I agree with your sense that the case study — as presented doesn’t do behavioral targeting justice.

    As an advocate for behavioral targeting, I value most its ability to reach people very, very early in their decision-making process — long, long before they’re visiting a branded site or shopping comparison engine.

    By looking for the right clues (not just sites and clicks, but also time of day, ISP location, type of domain, type of computer, and more), you can target people with uncanny precision and message them while they’re still open-minded about what they need or want. SUV vs. a minivan? Japanese or domestic? Lease or buy? Sporty or practical?

    In other words, you’re getting your brand into a consumer’s all-important consideration set — the 2-5 variants that they’re actively considering for purchase. Contextual ads and branded sites only become essential once you’re in this elite set.

    For unknown or under-appreciated brands, this upstream strategy of behavioral targeting can be a powerful path to growth; conversely, it can be a solid defense tactic for leading brands that want to shut others out.

    My sense is the case study missed this completely by narrowly looking only at a CPA — download a brochure, configure a car, etc. There’s a bigger and more important strategic impact that supersedes this tactical campaign measurement.

    If it’s executed more tactically, behavioral targeting can also stretch your ad budget. As an auto media buyer, I have no problem reaching a visitor in the, say, blog section of the Boston Globe, if I knew that they visited at least 10 pages in the Globe auto section during a given session. Much cheaper inventory and likely to deliver a competitive or even superior CPA.

    It’s even more compelling if the auto section itself is sold out of ad inventory when I need it — something that happens a lot these days,

  2. Thanks, James. Great insights. The last is especially true. Inventory in very targeted media often sells out when you need it most. BT can be a good way to affordable fill this void.

  3. Great post and an interesting comment from Adverlicious. I’m interested in understanding more about why James believes that BT reaches people “very very early in their decision making process” and why it reaches them “while they’re still open-minded”.

  4. Hi Ron –

    Imagine you’re Hyundai or some other fringe auto manufacturer. You’ve got some decent cars and a pretty interesting value proposition.

    But, there are few Google searches done for your brand names, traffic on your corporate website is modest and foot traffic at your dealers is almost non-existent. Research shows you that few people know about you and almost nobody puts you into their actual 2-4 car consideration set.

    With your online budget, you could …

    a. Redevelop your website … but nobody’s going there anyways and it already does a good job of explaining “why Hyundai”
    b. Buy more Google paid search ads … but nobody’s searching for your brand names and generic terms like “new car” are extremely expensive.
    c. Advertise on auto-centric or auto-buying websites … you’re doing this already but it’s very expensive. And your data suggests that these visitors have already done some homework and generally know what they’re looking for [hint: it’s usually not Hyundai].

    Or, you could use some basic behavioral targeting to identify people with online habits that would suggest an interest in a new car purchase and/or an overlap with Hyundai’s target consumer. Maybe you’ll find them surfing during evening hours from a .edu ISP on sites like Facebook or MySpace because first cars after college are a good business for you …?

    The idea is that long before they visit carmax.com or Google for “Toyota dealer”, you’ve had a chance to expose them to your message, develop awareness/interest, and position yourself in their consideration set.

    Make sense? In any case, it’s not right for everyone and it’s only a tactic to consider, not a cure-all solution.

  5. I appreciate your commentary on Behavioral Targeting and it’s strengths. I am from Jumpstart Automotive Media and was behind the publishing and development of the WhatisBT.com site. The missing piece to the success of the case study that wasn’t mentioned in your commentary is the last line on the study — “In tandem, Behavioral Targeting and Contextual Targeting are an optimal solution for reaching auto shoppers as the consumer is fully engaged with your message in and out of the auto shopping experience.”

    The numbers essentially say that BT is on par with – or even better in some instances — than contextually relevant targeting in the auto vertical. The reason this is important is that contextual targeting is extremely coveted in automotive. And if there’s a targeting mechanism — BT — that is as good or better, and opens up much, much more inventory, then the significance of it becomes that much greater.

    The point above doesn’t come across well in the case study, but this is the implication. BT opens up many new doors to target customers who are in market for an automobile. And when used correctly and with the right partners, can be a very effective media opportunity.

    Thanks

    Joe Kyriakoza
    Jumpstart Automotive Media

Comments are closed.