The online advertising industry has changed dramatically since its early days in 1996, showing spectacular growth in recent years. About $7.2billlion dollars of online advertising were sold in the U.S. alone in Q1 2008, according to the IAB. While this growth has fueled many new ventures, it has also raised the expectations of both advertisers and publishers. On one hand, publishers are demanding more options to monetize revenue on their ad inventory; on the other hand, advertisers have been asking for more accurate targeting to get a better return on investment.
Web 2.0 Changes the Rules of the Game
With the dawn of the New Internet or the Web 2.0 era, the traditional targeting options have proved to be less effective. The New Internet is about Web 2.0 sites. These sites have millions of users on them and more importantly are growing faster than the traditional sites. Web 2.0 sites include photo sites such as fotolog.com, social networks such as Tagged, games sites and other sites where users talk or interact with friends. In the future Web 2.0 sites will dominate the ad space available on the Internet.
Web 2.0 sites generally consist of user conversations; whether they are forums, blogs or social networking sites, the content on the webpage is usually informal and unrelated to the key advertising verticals such as travel or automotive. Traditional targeting targets sites or pages of sites and was developed for formal web content where each website is focused on a specific area such as travel or digital cameras or medical issues.
Prior to Web 2.0, content was developed by professionals who had search engines in mind to generate traffic. Site or page targeting worked well in such a scenario. All it had to do was read through the content and decide if the site was about travel or digital cameras or some medical issue. Then the appropriate travel ads or digital camera ads could be shown to all users that viewed the site. But with Web 2.0 sites, the job of content development was passed from professionals to web visitors; and the visitors did things their own way.
So each traditional site is clearly about one type of product – but each Web 2.0 site has millions of users and is not clearly about one type of product. With no verticals to focus on, site targeting failed to meet the advertiser’s expectations. If a travel advertiser bought ads on a Web 2.0 photo site the advertiser found just a few users who were interested in travel but most who were not interested in travel. The advertiser was not happy because the ROI was low and the publisher was not happy because the advertiser did not want to pay much for this.
Advertisers Find New Hope With Behavioral Targeting
But while site-targeting failed on Web 2.0 sites, at the same time they created a path for more accurate and focused Behavioral Targeting. Behavioral targeting allows advertisers to communicate not with all, but with just some of the consumers on each Web 2.0 site.
Behavioral Targeting is now raising the bar for advertisers and publishers. It moves the focus from looking at the site to looking at each user on the site. This is most important on big Web 2.0 sites with many different users. Behavioral targeting looks at the previous behavior of each user on the site to find which users have previously visited travel sites or sites about digital cameras etc. Industry experts claim that while it may not be accurate all the time, a user’s past behavior will always give us better understanding of the user’s preference and future behavior.
A person who has traveled once is a likely to travel again – just in the same way that a person who is late to dinner often is likely be late for dinner again. Humans are creatures of habit – so analyzing their past behavior more accurately predicts their future behavior and the products they are interested in. Results have shown that early claims about Behavioral Targeting are proving true. Many companies (mine included) have seen a drastic rise in effectiveness of Behavioral Targeting ads vs. traditional site targeted ads.
The challenge with behavior is technology and scale. Gathering enough data and finding enough users that have previously shown an interest in Travel requires a huge resources and investment in sophisticated technology. To find enough users also requires you to have lots of users to choose from. So the winners are likely to be the players that have access to billions of ad impressions and hundreds of millions of users – so that they can find enough of the users that an advertiser wants.
Behavioral Targeting Is Showing Promise
Behavioral Targeting excels over every other targeting option in terms of accuracy — by far. As a result, it has caught the attention of advertisers the world over. In their bid to ensure better ROI, advertisers are asking for more and more details about the user being targeted. Publishers like the technology too as the advertisers pay more for better targeting. On an average day 10-15 inquiries about Behavioral Targeting from advertisers and publishers may roll into a typical Behavioral Targeting shop. And this sudden, increased interest level is telling and a prediction of where the Internet advertising market is heading.