Behavioral targeting is the hot topic this year among publishers and advertisers, and for good reason. I have been covering this approach to online advertising since core providers like Revenue Science and Tacoda emerged several years ago. The dark art of behavioral ad targeting ("BT" in the trade) started out as a hard sell because it was the kind of web technology that was difficult for clients to see in action and it relied on following users with ads in a way that feels a little creepy. BT may actually represent the natural evolution of interactive marketing, because it takes information from a user (her recent browsing patterns) and feeds back to her ads that are more relevant to her immediate needs and interests.
If a WSJ.com reader goes to the site's lifestyle-oriented auto section in the course of perusing financial news, she is probably in the market for a car. Cookied and segmented by the BT engine as a potential car buyer, WSJ.com no longer has to rely on context to feed targeted ads to that reader. It can give her another car ad even when she is on the stocks page. This helps WSJ.com increase its inventory of lucrative, high-CPM car ads; allows the advertisers to find and follow qualified buyers with the right ads; and even gives the user ads that are more relevant to her interests.
Yeah, it sounds a little creepy to have ads stalk a user, but most advertisers have been pleased with the results and so far most of the BT companies have respected the privacy of users and their personally identifiable information. For all of these reasons, as well as increasing limitations in premium inventory, this will be a breakout year for BT, according to the soothsayers. eMarketer predicts that 2007 will see spending on BT campaigns grow to $1.5 billion and then again to $2.1 billion in 2008. Susquehanna Financial Group is even more bullish. It polled publishers and advertisers and concluded that BT could account for up to 12% of all online ad spending within the next five years.
Considering that much of online ad revenue now goes to search, any other platform that grabs 12% of earnings is a substantial shift in media buying. JupiterResearch found that advertisers are really driving a lot of this market. Only 14% of advertisers wanted to invest in the BT approach last year but about 24% expected to do so this year. Ad networks like BlueLithium, which offers a range of targeting techniques, tell me that almost all of their campaigns now have some BT component.
Ultimately, this is good news for publishers because it changes the online ad game in their favor. Not only does BT help a publisher better monetize its cheaper inventory, but it also calls attention to the value of its internal data. Many publishers will be joining behavioral targeting networks in the coming year, and it is in this context that their intimate knowledge of their audience proves its worth. In these models, you cookie one of your users when she is attracted to content at your site, but that cookie and the habits it recorded at your site are then used to deliver relevant ads as she browses among the other sites in the network. You get a revenue share of the ads that are served elsewhere. Thus, the higher the quality of your audience, and the better it is segmented, the more valuable these profiles become to the network. Some sites may be able to command higher CPMs overall and even negotiate better revenue-sharing with the networks.
There are caveats. Privacy concerns will heighten as the technique becomes more common. And publishers need to be judicious about selling BT because they don't want it to overshadow the value of their contextually targeted product. Run of site and contextual placements leverage the entire audience you worked so hard to amass. Sites experienced with BT warn against letting clients cherry-pick too selectively. "We don't want to be known as the place to reach $100,000 plus income earners who like gadgets," says Brian Quinn, VP of advertising at WSJ.com.
But publishers do want to be known for owning their target audiences. In the next stage of interactive advertising, the winners will be those who not only have the best audience but maintain the best data about them. Understanding the process by which people consider products and engage in research and purchasing decisions—that will be the coin of the new realm.