Study: Targeted ads worth at least twice as much
Behaviorally-targeted advertising secured an average of 2.68 times as much revenue per ad as non-targeted “run of network” advertising. When consumers click, 6.8 percent of those who click on targeted ads end up buying what’s advertised, compared to 2.8 percent for run-of-network ads.
The study comes out just as Google’s AdWords unit is being reported to be providing new retargeting tools to members of Google’s ad network. Retargeting is a refinement of behavioral advertising in which consumer behavior is tracked, and ads are served based on that behavior, which is to say, based on the sites a consumer visits.
The refinement with retargeting is that after consumers navigate away from the initial site, advertisers can continue to serve specific ads to the new sites those consumers visit.
The study was commissioned by the Network Advertising Initiative (NAI), and conducted by economist Howard Beales, the former Director of the Bureau of Consumer Protection at the U.S. Federal Trade Commission.
The study surveyed 12 ad networks (including 9 of the top 15) operating on the Internet, but the results are certainly instructive for advertising in other venues, including pay TV networks.
Most policy discussions about behavioral targeting have been responses to consumers’ privacy concerns. If readers take anything from the combination of the release of the study and the news from Google, it’s that behavioral targeting is far too valuable for both advertisers and network operators to give it up.
Beales said, “This study found that behaviorally targeted advertising is a critical component of ad network, publisher, and advertiser success. Behaviorally targeted ads sell for twice the price and offer twice the effectiveness of normal run-of-network ads, significantly enhancing the advertising revenue engine driving the growth of the Internet.”
Beale acknowledges that the study is far from comprehensive, but says it is one of the first empirical studies of the results of behavioral targeting and is clearly indicative.
Key findings of the study include the following:
- The average relative cost of behaviorally-targeted ads in 2009 was 2.68 times greater than that of standard run-of-network advertising. The weighted average cost per thousand ad impressions (CPM) for behaviorally targeted ads was $4.12, as opposed to $1.98 for run-of-network advertising.
- Behaviorally-targeted ads accounted for 17.9 percent of respondents’ advertising revenue, with revenue increasing from 16.2 percent in Q1 to 19.4 percent in Q4 2009.
- More than half of the respondents’ advertising revenue – 54.6 percent – went towards the purchase of inventory and was therefore shared with publishers and content producers to support their businesses.
- Data from a smaller subset of the survey respondents suggested that users who clicked on a behaviorally-targeted ad were more than twice as likely to complete a transaction or sale with that site than those who clicked a standard run-of-service ad (6.8 percent vs. 2.8 percent).
- Total online ad revenue for the twelve companies who participated in the study was $3.323 billion in 2009.
The full report is available at the NAI website.