Targeted ads benefit US brands and publishers

25 March 2010

NEW YORK: Targeted internet advertising, based on the online behaviour of consumers, delivers benefits for both marketers and publishers, a new study has indicated.

The Network Advertising Initiative, an industry body with members including Google, The Fox Audience Network and Yahoo, conducted a survey covering 12 advertising networks in the US.

Data from five networks showed that ads drawing on web users' past browsing habits and interests boasted a conversion rate of 6.8%, compared with a figure of 2.8% for ads not meeting these criteria.

Moreover, the typical price recouped by publishers for this kind of inventory stood at $4.12 (€3.10; £2.77) in 2009, measured against the total of $1.98 delivered for normal run-of-network ads.

Statistics from nine networks taking part in poll also showed that sales of behaviourally-targeted ad space accounted for just 18% of their combined revenues of $3.3 billion last year.

"The study demonstrates the increasing significance of behavioral advertising to the economic model supporting free online content and services for consumers," Charles Curran, executive director of the NAI, argued.

It is hoped this research will provide useful evidence to policy-makers considering the pros and cons of this form of advertising, which recently attracted the attention of the Federal Trade Commission.

Howard Beales, author of the NAI's study, and who previously headed up the consumer protection arm of the FTC, said this approach is delivering benefits, with minimal drawbacks for the target audience.

"It's clear that behavioral targeting has the potential to significantly elevate the value of the inventory - to the advertiser, to the publisher and to the network," he said.

"For most consumers, there's not enough at stake in this question of 'Do I want to share my information or not?' for it to be worth thinking about. That's why they don't pay any attention to privacy policies."

In contrast, any attempts to institute a strictly "opt-in" system would effectively "kill the industry", according to Beales.

Critics of this type of marketing, however, suggested the advantages to publishers resulted from the intrusive gathering of information, and that the US government should impose tighter regulations.

"The price increase they're getting from behavioral targeting is based on the hijacking of consumer data," Jeff Chester, executive director of the Center for Digital Democracy, said.

Data sourced from Forbes/MediaPost; additional content by Warc staff