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Perhaps it’s because the market’s appetite has been whetted by the hyper-focused nature of Google advertising. Or maybe the web’s marketing technology has finally caught up to its hype. But there’s no question that targeted advertising has arrived, and it’s very much for real.

If we don’t screw the whole thing up.

Highly targeted advertising on the web is, of course, not a new idea. As far back as 1996, edgy companies like Firefly (my alma mater) were using crude web tracking and registration tools to deliver micro targeting to curious advertisers. The path to the targeting grail was then well worn by companies like MatchLogic, DoubleClick and Engage. But wide proliferation of ad targeting was constrained by technology, audience and privacy concerns, and ultimately by the implosion of the online ad market. But now, in a robust market, the scent is once again in the wind, and there’s intense interest in targeted advertising.

To be clear, online ad targeting falls into three somewhat overlapping spheres:

  • BEHAVIORIAL TARGETING: We watch what consumers do on our sites, use that clickstream data to put them into behavioral buckets (“interested in financial information,” “outdoor enthusiast,” “gardener” and so on) and then send them ads based on their profiles.
  • POINT-OF-ACTION TARGETING: Kind of an extension of behavioral targeting, POA targeting focuses on reaching only consumers who are “in-market” for a given product or service. If you’ve repeatedly checked interest rates or compulsively looked at new car models and finance packages in the last 30 days, you’ll likely be targeted with offers for refinancing or a new Mazda.
  • DEMOGRAPHIC AND GEOGRAPHIC TARGETING: Through visitor registration, sweepstakes and other means, actual real world identifiers like gender, age and location are collected and associated with the consumer, who is then targeted with appropriate messaging.

Today there are at least a dozen companies out there taking cuts at the targeting issue. Tacoda and Revenue Science work with media companies to gather and sort information about their visitors in order to target them. Claria – nee Gator – and When U promise to help advertisers reach consumers right at the point of action. Sites with heavy user registration and a quality ad serving platform can ostensibly offer some levels of geo and demo targeting right now. And there are several companies and products out there that promise advertisers real-time optimization and targeting through observation of “anonymous” user behavior and transactions. I’ll save comment on the merits and viability of these varied approaches for another column. For now, let me offer five bits of advice that will serve all those who might slice and dice the Internet audience:

  • THE CLUSTERS HAVE TO MAKE SENSE: Assuming that (a) media providers still want to make money and (b) advertisers want those media providers to be around next year, it’s important for everybody to recognize the practical limits of targeting. It may feel great to tell the Marketing Director that he can reach just young-female-allergy-sufferers-in-the-market-for-a-Hyundai, but it makes zero economic sense for the media provider to sell that cluster. Targeting clusters need be of a certain size (nobody looks good when a buy ends up delivering 57 customers!) and they need to be predictable. ADVICE: If a site has invested in targeting technology, collaborate with them to determine the best means of reaching the kind of customers you’re after. You may end up with a broader target that might be your ideal, but it may end up providing you with better distribution of your message, a better reach among potential customers, more reasonable frequency of messaging and a better result.
  • PAY ATTENTION TO INVENTORY PREDICTION AND FREQUENCY: The advertiser’s desire to microtarget and to reach a given number of customers – often within a specific time frame – puts tremendous pressure on the media company to agree to the deal and then work like hell to deliver what’s been purchased. But even under the best conditions, inventory prediction is rocket science. Throw in targeting filters and you’ve got a mess. So what if there aren’t enough of the kind of buyers you’re after? You get massive frequency… absolute carpet-bombing of the targeted customers with your message. A good thing? Not for you, not for the site and not for the consumer. ADVICE: Something’s got to give. Either the target gets bigger, the contracted number gets smaller or the duration of the campaign gets longer. Very few sites have the kind of scale to deliver targeted buys within a short time window. Don’t force them to set unrealistic expectations to get your business.
  • TARGETING IS A TACTIC, NOT A STRATEGY: Advertisers are better served by taking a more expansive approach to online advertising. Want to reach your customer while she’s connected with her favorite website? Go with a mix of specific placement, targeted impressions and run-of-site. Being able to target is not the same as being able to target well. There is an awful lot we don’t yet know about targeting, inventory distribution and user behavior. ADVICE: A mix of advertising programs that includes targeting is – today – a better strategy.
  • CONTEXT AND RELATIONSHIPS STILL MATTER: The web may be a wondrous, chaotic cacophony of diverse voices, but if you’re advertising something besides PO*RN, VIA*GRA knockoffs and low-low interest rates, you probably care where your ad appears. When aggregators or networks offer targeting and on-the-fly optimization, advertisers owe it to themselves to ask the content question. Are there really thousands of quality sites out there? Divorcing the targeting agenda from the ad environment question is a dangerous move. ADVICE: Advertisers should draw a line around the kinds of ad placements they’ll accept and those they won’t. Then examine the targeting options within your universe of acceptable sites.
  • PAY AS YOU GO: In every other medium on the planet, segmentation and targeting cost money. The media provider is accepting a smaller buy, and going to more trouble to deliver it, so the advertiser pays a premium. This should seem obvious, but the point’s been lost on many interactive buyers. For targeting to truly develop online, it needs to have a solid financial foundation. ADVICE TO SELLERS: Set and hold the line on targeting premiums. ADVICE TO BUYERS: Wanna play? Gotta pay.

If we all keep our heads up and take the long view, we might just get it right this time.

Send your comments and questions directly to Doug Weaver

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