Behavioral Ad Targeting Isn’t the Problem—It’s the Format

Jul 31, 2019


Article ImageA controversial new study by Carnegie Mellon University found that digital publishers get roughly 4% more revenue for an ad impression that is cookie-enabled—or personalized—versus one that isn’t. That’s not much. And while the sample was limited—they only reviewed ads for one “large U.S. media company over the course of one week”—it highlights a question publishers have been grappling with for a long time. 

Is cookie-based ad-targeting worth it? Given the mounting costs of investing in data stack technology, reputation issues (the “creepy factor”), and regulatory concerns like GDPR and CCPA that publishers routinely face as a result of behavioral ad-targeting, is the value really there? And is it justified? The Carnegie Mellon findings suggest that the benefit is minimal. However, as I see it, publishers are focusing on the wrong issue.

 

Blame the Format, Not the Targeting 

The problem isn’t necessarily the ad-targeting itself; rather, it’s the format that’s inherently flawed. According to Smart Insights, the average display ad click-through rate (CTR) across all formats is a measly 0.05%—or five clicks per every 10,000 impressions. These “performance” ad units simply aren’t performing, which undercuts publisher revenue while taking up valuable website real estate. After being bombarded with them for years, consumers just don’t like display ads. This is why a majority (51%) believe publisher sites should feature fewer ads, not more. As a result, more are tuning out the ads or blocking them completely. And while making them more targeted increases their effectiveness, it does so only marginally.

To truly drive brand lift and performance online, for the benefit of consumers and brands alike, publishers need to consider new types of ad formats that consumers actually want to engage with. And while brands are willing to pay more for personalized traditional display impressions, newer, nontraditional ad formats are generally greater revenue opportunities for publishers. 

Branded content, native articles, video, games, and podcasts are all good examples. These types of campaigns are demonstrably more interesting to readers than a traditional display ad and they command premium prices. Branded content in particular allows for more high-impact ad formats that can deliver the monetization publishers crave while driving improved consumer engagement for marketers. A recent Ipsos ASI study bears that out, with high-impact branded content 41% more likely to be seen as enjoyable compared to a standard display ad. And, on the revenue side of things, a publisher like Forbes, which has gone all-in on branded content, now get 40% of its total ad revenue from it.

Transitioning to branded content and, particularly, interactive ad formats is critical to drawing in users and making a profit from that growth. For example, interactive ads can boost time spent with a brand’s campaign by nearly 50% compared to a non-interactive ad. Similarly, other studies that look at the value of gamification in branded content have found that these ads can drive a CTR of more than 28%. Design is also a key factor for publishers to consider. An aesthetically pleasing ad—compared to the well-known ugliness of a standard banner ad, for example -- feels more immersive and generally leads to stronger performance (see Facebook Canvas Ads). 

The formats that combine these desirable elements—interactivity and design, while layering them with personalization, will ultimately win the day. In fact, ads that are more interactive and design-oriented are 49% more likely to drive personal recommendations than traditional display. Clearly, behavioral targeting can work harder for publishers and brands if the vehicle is more in line with consumer demand. 

 

Building the Infrastructure 

One challenge in adopting interactive and high-impact ad experiences is scale. Given the content and technology requirements, moving beyond traditional display ads is difficult for many publishers, who are seeing their ad dollars shrink. More money is being funneled to Facebook, Google and Amazon, with Facebook and Google alone making up roughly 60%of all digital ad spend. Most publishers simply don’t have the in-house tools and resources required to build full-fledged interactive and branded content in a scalable way. 

Fortunately, third-party content and technology providers—and, to a lesser extent, creative agencies that charge a considerable fee—have emerged to build the infrastructure needed for these types of campaigns. As ad budgets for formats like branded content, interactive ads and game-like ads rise, it’s likely that more publishers will seek out partnerships with these providers to get a piece of that pie. 

While Carnegie Mellon University’s study on personalized ad-targeting’s value for publishers is interesting, it raises the wrong questions. It’s akin to worrying about the color of a car that has no engine. Instead, publishers need to reconsider the traditional display format. Only then can they crack the code on new or more meaningful forms of revenue. 


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