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Targeted advertising is a form of advertising where online advertisers can use sophisticated methods to target the most receptive audiences with certain traits, based on the product or person the advertiser is promoting. These traits can either be demographic which are focused on race, economic status, sex, age, the level of education, income level and employment or they can be psychographic focused which are based on the consumer's values, personality, attitudes, opinions, lifestyles and interests. They can also be behavioral variables, such as browser history, purchase history, and other recent activity. Targeted advertising is focused on certain traits and the consumers who are likely to have a strong preference will receive the message instead of those who have no interest and whose preferences do not match a product's attribute this eliminates wastage.
Traditional forms of advertising, including billboards, newspapers, magazines and radio, are progressively becoming replaced by online advertisements. Information and communication technology (ICT) space has transformed over recent years, resulting in targeted advertising to stretch across all ICT technologies, such as web, IPTV, and mobile environments. In next generation advertising, the importance of targeted advertisements will radically increase, as it spreads across numerous ICT channels cohesively.
Through the emergence of new online channels, the need for targeted advertising is increasing because companies aim to minimize wasted advertising by means of information technology. Most targeted new media advertising currently uses second-order proxies for targetings, such as tracking online or mobile web activities of consumers, associating historical web page consumer demographics with new consumer web page access, using a search word as the basis for implied interest, or contextual advertising.
- 1 Types
- 2 Process
- 3 Effectiveness
- 4 Benefits and disadvantages
- 5 Controversies
- 6 See also
- 7 References
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Web services are continually generating new business ventures and revenue opportunities for internet corporations. Companies have rapidly developing technological capabilities that allow them to gather information about web users. By tracking and monitoring what websites users visit, internet service providers can directly show ads that are relative to the consumer's preferences. Most of today's websites are using these targeting technology to track users' internet behaviour and there is much debate over the privacy issues present.
Search engine marketing
Search engine marketing uses search engines to reach target audiences. For example, Google's Google Remarketing Campaigns are a type of targeted advertising where websites use the IP addresses of computers that have visited their websites to remarket their ad specifically to the user who has previously been on their website as they use websites that are a part of the Google display network, or when searching for keywords related to a product or service on the google search engine. Dynamic remarketing can improve the targeted advertising as the ads are able to include the products or services that the consumers have previously viewed on the advertisers' website within the ads.
Google Adwords have different platforms how the ads appear. The Search Network displays the ads on 'Google Search, other Google sites such as Maps and Shopping, and hundreds of non-Google search partner websites that show AdWords ads matched to search results'. 'The Display Network includes a collection of Google websites (like Google Finance, Gmail, Blogger, and YouTube), partner sites, and mobile sites and apps that show AdWords ads matched to the content on a given page.' These two kinds of Advertising networks can be beneficial each specific goal of the company, or type of company. For example, the search network can benefit a company with the goal of reaching consumers searching for a particular product or service.
Other ways Advertising campaigns are able to target the user is to use browser history and search history, for example, if the user typed in promotional pens in a search engine, such as Google; ads for promotional pens will appear at the top of the page above the organic pages, these ads will be targeted to the area of the users IP address, showing the product or service in the local area or surrounding regions, the higher ad position is a benefit of the ad having a higher quality score. The ad quality is affected by the 6 components of the quality score:
- The ad's expected click-through rate
- The quality of the landing page
- The ad/search relevance
- Geographic performance
- The targeted devices
When ranked based on this criteria, will affect the advertiser by improving ad auction eligibility, actual cost per click (CPC), ad position, and ad position bid estimates; to summarise, the better the quality score, the better ad position, and lower costs.
Google uses its display network to track what users are looking at and to gather information about them. When a user goes onto a website that uses the google display network it will send a cookie to google, showing information on the user, what he or she searched, where they are from, found by the ip address, and then builds a profile around them, allowing google to easily target ads to the user more specifically. For example, if a user went onto promotional companies' websites often, that sell promotional pens, google will gather data from the user such as age, gender, location and other demographic information as well as information on the websites visited, the user will then be put into a category of promotional products, allowing google to easily display ads on websites the user visits relating to promotional products. (Betrayed By Your Ads!) these types of adverts are also called behavioural advertisements as they track the website behaviour of the user and displays ads based on previous pages or searched terms. ("Examples Of Targeted Advertising")
Social media targeting
Social media targeting is a form of targeted advertising, that uses general targeting attributes such as geotargeting, behavioral targeting, socio-psychographic targeting, but gathers the information that consumer have provided on each social media platform. For example, on Facebook if a consumer has liked clothing pages they will receive ads based on those page likes and the area they have said they live in, this allows advertisers to target very specific consumers as they can specify cities and interests to their needs. Social media also creates profiles of the consumer and only needs to look one place, one the users' profile to find all interests and 'likes'.
E.g. Facebook lets advertisers target using broad characteristics like Gender, Age, and Location. Furthermore, they allow more narrow targeting based on Demographics, Behavior, and Interests (see a comprehensive list of Facebook's different types of targeting options).
TV and mobile targeting
Another sphere targeted advertising occurs in is television. Advertisers can reach a consumer that is using digital cable, which is classified as Internet Protocol Television (IPTV). This is effective when information is collected about the user, their age, gender and location, and also their personal interests in films, etc. This data is then processed, optimized and then consumers are advertised to accordingly.
Since the early 2000s, advertising has been pervasive online and more recently in the mobile setting. Targeted advertising based on mobile devices allows more information about the consumer to be transmitted, not just their interests, but their information about their location and time. This allows advertisers to produce advertisements that could cater to their schedule and a more specific changing environment.
Content and contextual targeting
The most straightforward method of targeting is content/contextual targeting. This is when advertisers put ads in a specific place, based on the relative content present (Schlee, 2013). Another name used is content-oriented advertising, as it is corresponding the context being consumed. This targeting method can be used across different mediums, for example in an article online, about purchasing homes would have an advert associated with this context, like an insurance ad. This is usually achieved through an ad matching system which analyses the contents on a page or finds key words and presents a relevant advert, sometimes through pop-ups (Fan & Chang, 2010). Though sometimes the ad matching system can fail, as it can neglect to tell the difference between positive and negative correlations. This can result in placing contradictory adverts, which are not appropriate to the content (Fan & Chang, 2010).
Technical targeting is associated with the user's own software or hardware status. The advertisement is altered depending on the user's available network bandwidth, for example if a user is on their mobile phone that has limited connection, the ad delivery system will display a version of the ad that is smaller for a faster data transfer rate.
Addressable advertising systems serve ads directly based on demographic, psychographic, or behavioral attributes associated with the consumer(s) exposed to the ad. These systems are always digital and must be addressable in that the end point which serves the ad (set-top box, website, or digital sign) must be capable of rendering an ad independently of any other end points based on consumer attributes specific to that end point at the time the ad is served. Addressable advertising systems therefore must use consumer traits associated with the end points as the basis for selecting and serving ads.
Time targeting is centred around time and focuses on the idea of fitting in around people's everyday lifestyles (Schlee, 2013). For example, scheduling specific ads at a timeframe from 5–7pm, when the typical commute home from work is.
Sociodemographic targeting focuses on the characteristics of consumers, including their age, gender, salary and nationality (Schlee, 2013). The idea is to target users specifically, using this data about them collected, for example, targeting a male in the age bracket of 18-24. Facebook uses this form of targeting by showing advertisements relevant to the user's individual demographic on their account, this can show up in forms of banner ads, or commercial videos (Taylor et al., 2011).
Geographical and location-based targeting
This type of advertising involves targeting different users based on their geographic location. IP addresses can signal the location of a user and can usually transfer the location through ZIP codes. (Schlee, 2013) Locations are then stored for users in static profiles, thus advertisers can easily target these individuals based on their geographic location. A location-based service (LBS) is a mobile information service which allows spatial and temporal data transmission and can be used to an advertiser's advantage (Dhar & Varshney, 2011). This data can be harnessed from applications on the device that allow access to the location information (Peterson & Groot, 2009). This type of targeted advertising focuses on localising content, for example a user could be prompted with options of activities in the area, for example places to eat, nearby shops etc. Although producing advertising off consumer's location-based services can improve the effectiveness of delivering ads, it can raise issues with the user's privacy (Li & Du, 2012).
This form of targeted advertising is centred around the activity/actions of users, and is more easily achieved on web pages (Krumm, 2010). Information from browsing websites can be collected from data mining, which finds patterns in users search history. Advertisers using this method believe it produces ads that will be more relevant to users, thus leading consumers be more likely influenced by them (Yan et al., 2009). If a consumer was frequently searching for plane ticket prices, the targeting system would recognise this and start showing related adverts across unrelated websites, such as airfare deals on Facebook. Its advantage is that it can target individual's interests, rather than target groups of people whose interests may vary (Schlee, 2013).
Retargeting is where advertisers use behavioural targeting to produce ads that follow users after users have looked at or purchased a particular item. An example of this is store catalogs, where stores subscribe customers to their email system after a purchase hoping that they draw attention to more items for continuous purchases. The main example of retargeting that has earned a reputation from most people are ads that follow users across the web, showing them the same items that they have looked at in the hope that they will purchase them. Retargeting is a very effective process; by analysing consumers activities with the brand they can address their consumers' behaviour appropriately.
Advertising provides advertisers with a direct line of communication to existing and prospective consumers. By using a combination of words and/or pictures the general aim of the advertisement is to act as a "medium of information" (David Oglivy) making the means of delivery and to whom the information is delivered most important. Advertising should define how and when structural elements of advertisements influence receivers, knowing that all receivers are not the same and thus may not respond in a single, similar manner. Targeted advertising serves the purpose of placing particular advertisements before specific groups so as to reach consumers who would be interested in the information. Advertisers aim to reach consumers as efficiently as possible with the belief that it will result in a more effective campaign. By targeting, advertisers are able to identify when and where the ad should be positioned in order to achieve maximum profits. This requires an understanding of how customers' minds work (see also neuromarketing) so as to determine the best channel by which to communicate.
Behavioral advertising is the most common form of targeting used online. Internet cookies are sent back and forth between an internet server and the browser, that allows a user to be identified or to track their progressions. Cookies provide detail on what pages a consumer visits, the amount of time spent viewing each page, the links clicked on; and searches and interactions made. From this information, the cookie issuer gathers an understanding of the user's browsing tendencies and interests generating a profile. Analysing the profile, advertisers are able to create defined audience segments based upon users with similar returned similar information, hence profiles. Tailored advertising is then placed in front of the consumer based upon what organisations working on behalf of the advertisers assume are the interests of the consumer. These advertisements have been formatted so as to appear on pages and in front of users that it would most likely appeal to based on their profiles. For example, under behavioral targeting if a user is known to have recently visited a number of automotive shopping and comparison sites based on the data recorded by cookies stored on the user's computer, the user can then be served automotive related advertisements when visiting other sites. So behavioral advertising is reliant on data both wittingly and unwittingly provided by users and is made up of two different forms: one involving the delivery of advertising based on assessment of user's web movements; the second involving the examination of communication and information as it passes through the gateways of internet service providers.
Demographic targeting was the first and most basic form of targeting used online. involves segmenting an audience into more specific groups using parameters such as gender, age, ethnicity, annual income, parental status etc. All members in the group share the common trait. So, when an advertiser wishes to run a campaign aimed at a specific group of people then that campaign is intended only for the group that contains those traits at which the campaign is targeted. Having finalized the advertiser's demographic target, a website or a website section is chosen as a medium because a large proportion of the targeted audience utilizes that form of media.
Segmentation using psychographics Is based on an individual's personality, values, interests and lifestyles. A recent study concerning what forms of media people use- conducted by the Entertainment Technology Center at the University of Southern California, the Hallmark Channel, and E-Poll Market Research- concludes that a better predictor of media usage is the user's lifestyle. Researchers concluded that while cohorts of these groups may have similar demographic profiles, they may have different attitudes and media usage habits. Psychographics can provide further insight by distinguishing an audience into specific groups by using their personal traits. Once acknowledging this is the case, advertisers can begin to target customers having recognized that factors other than age for example provides greater insight into the customer.
Contextual advertising is a strategy to place advertisements on media vehicles, such as specific websites or print magazines, whose themes are relevant to the promoted products (Joeng & King, 2005, p. 2). Advertisers apply this strategy in order to narrow-target their audiences (Belch & Belch, 2009, p. 2; Jeong and King, 2005). Advertisements are selected and served by automated systems based on the identity of the user and the displayed content of the media. The advertisements will be displayed across the user's different platforms and are chosen based on searches for key words; appearing as either a web page or pop up ads. It is a form of targeted advertising in which the content of an ad is in direct correlation to the content of the webpage the user is viewing.
The major psychographic segments
Every brand, service or product has itself a personality, how it is viewed by the public and the community and marketers will create these personalities to match the personality traits of their target market. Marketers and advertisers create these personalities because when a consumer can relate to the characteristics of a brand, service or product they are more likely to feel connected towards the product and purchase it.
Everyone is different and advertisers compensate for this, they know different people lead different lives, have different lifestyles and different wants and needs at different times in their consumers lives ("Psychographic Market Segmentation | Local Directive", 2016). Advertisers who base their segmentation on psychographic characteristics promote their product as the solution to these wants and needs. Segmentation by lifestyle considers where the consumer is in their life cycle and what is important to them at that exact time.
Opinions, attitudes, interests and hobbies
Psychographic segmentation also includes opinions on religious, gender and politics, sporting and recreational activities, views on the environment and arts and cultural issues. The views that the market segments hold and the activities they participate in will have a massive impact on the products and services they purchase and it will even affect how they respond to the message.
Alternatives to behavioral advertising and psychographic targeting include geographic targeting and demographic targeting
When advertisers want to reach as many consumers as efficiently as possible they use a six step process.
- identify the objectives the advertisers do this by setting benchmarks, identifying products or proposals, identifying the core values and strategic objectives. This step also includes listing and monitoring competitors content and creating objectives for the next 12-18months.
- The second step understanding buyers, is all about identifying what types of buyers the advertiser wants to target and identifying the buying process for the consumers.
- Identifying gaps is key as this illustrates all of the gaps in the content and finds what is important for the buying process and the stages of the content.
- Stage 4 is where the content is created and the stage where the key messages are identified and the quality bench line is discussed.
- Organising distribution is key for maximising the potential of the content, these can be social media, blogs or google display networks.
The last step is vital for an advertiser as they need to measure the return on the investment (ROI) there are multiple ways to measure performance, these can be tracking web traffic, sales lead quality, and/ or social media sharing.
Targeting improves the effectiveness of advertising it reduces the wastage created by sending advertising to consumers who are unlikely to purchase that product, target advertising or improved targeting will lead to lower advertising costs and expenditures.
The effects of advertising on society and those targeted are all implicitly underpinned by consideration of whether advertising compromises autonomous choice (Sneddon, 2001).
Those arguing for the ethical acceptability of advertising claim either that, because of the commercially competitive context of advertising, the consumer has a choice over what to accept and what to reject.
Humans have the cognitive competence and are equipped with the necessary faculties to decide whether to be affected by adverts (Shiffman, 1990). Those arguing against note, for example, that advertising can make us buy things we do not want or that, as advertising is enmeshed in a capitalist system, it only presents choices based on consumerist-centered reality thus limiting the exposure to non-materialist lifestyles.
Although the effects of target advertising are mainly focused on those targeted it also has an effect on those not targeted. Its unintended audiences often view an advertisement targeted at other groups and start forming judgments and decisions regarding the advertisement and even the brand and company behind the advertisement, these judgments may affect future consumer behavior (Cyril de Run, 2007).
- Secured an average of 2.7 times as much revenue per ad as non-targeted "run of network" advertising.
- Twice as effective at converting users who click on the ads into buyers
However, other studies show that targeted advertising, at least by gender, is not effective.
One of the major difficulties in measuring the economic efficiency of targeting, however, is being able to observe what would have happened in the absence of targeting since the users targeted by advertisers are more likely to convert than the general population. Farahat and Bailey  exploit a large-scale natural experiment on Yahoo! allowing them to measure the true economic impact of targeted advertising on brand searches and clicks. They find, assuming the cost per 1000 ad impressions (CPM) is $1, that:
- The marginal cost of a brand-related search resulting from ads is $15.65 per search, but is only $1.69 per search from a targeted campaign.
- The marginal cost of a click is 72 cents, but only 16 cents from a targeted campaign.
- The variation in CTR lifts from targeted advertising campaigns is mostly determined by pre-existing brand interest.
Research shows that Content marketing in 2015 generates 3 times as many leads as traditional outbound marketing, but costs 62% less (Plus) showing how being able to advertise to targeted consumers is becoming the ideal way to advertise to the public. As other stats show how 86% of people skip television adverts and 44% of people ignore direct mail, which also displays how advertising to the wrong group of people can be a waste of resources.
Benefits and disadvantages
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There are many benefits of targeted advertising for both consumers and advertisers:
Targeted advertising benefits consumers because advertisers are able to effectively attract the consumers by using their purchasing and browsing habits this enables ads to be more apparent and useful for customers. Having ads that are related to the interests of the consumers allow the message to be received in a direct manner through effective touch points. An example of how targeted advertising is beneficial to consumers if that if someone sees an ad targeted to them for something similar to an item they have previously viewed online and were interested in, they are more likely to buy it.
Consumers can benefit from targeted advertising in the following ways:
- More effective delivery of desired product or service directly to the consumer (Keating, n.d): having assumed the traits or interests of the consumer from their targeting, advertisements that will appeal and engage the customer are used.
- More direct delivery of a message that relates to the consumer's interest (Keating, n.d): advertisements are delivered to the customer in a manner that is comfortable, whether it be jargon or a certain medium, the delivery of the message is part of the consumer's 'lifestyle'
Advertisers benefit with target advertising are reduced resource costs and creation of more effective ads by attracting consumers with a strong appeal to these products. Targeted advertising allows advertisers in reduced cost of advertisement by minimising "wasted" advertisements to non interested consumers. Targeted advertising captivate the attention of consumers they were aimed at resulting in higher return on investment for the company.
Because behavioral advertising enables advertisers to more easily determine user preference and purchasing habit, the ads will be more pertinent and useful for the consumers. By creating a more efficient and effective manner of advertising to the consumer, an advertiser benefits greatly and in the following ways:
- More efficient campaign development (Keating, n.d): by having information about the consumer an advertiser is able to make more concise decisions on how to best communicate with them.
- Better use of advertising dollar (Keating, n.d): A greater understanding of the targeted audience will allow an advertiser to achieve better results with an advertising campaign
- Increased return on investment: Targeted advertisements will yield higher results for lower costs.
Using information from consumers can benefit the advertiser by developing a more efficient campaign, targeted advertising is proven to work both effectively and efficiently (Gallagher & Parsons, 1997). They don't want to waste time and money advertising to the "wrong people". Through technological advances, the internet has allowed advertisers to target consumers beyond the capabilities of traditional media, and target significantly larger amount (Bergemann & Bonatti, 2011). The main advantage of using targeted advertising is how it can help minimize wasted advertising by using detailed information about individuals who are intended for a product. If consumers are produced these ads that are targeted for them, it is more likely they will be interested and click on them. 'Know thy consumer', is a simple principle used by advertisers, when businesses know information about consumers, it can be easier to target them and get them to purchase their product. Some consumers do not mind if their information being used, and are more accepting to ads with easily accessible links. This is because they may appreciate adverts tailored to their preferences, rather than just generic ads. They are more likely to be directed to products they want, and possibly purchase them, in return generating more income for the business advertising.
Targeted advertising raises privacy concerns. Targeted advertising is performed by analyzing consumers' activities through online services such as cookies and data-mining, both of which can be seen as detrimental to consumers' privacy. Marketers research consumers' online activity for targeted advertising campaigns like programmatic and SEO. Consumers' privacy concerns revolve around today's unprecedented tracking capabilities and whether to trust their trackers. Targeted advertising aims to increase promotions' relevance to potential buyers, delivering ad campaign executions to specified consumers at critical stages in the buying decision process. This potentially limits a consumer's awareness of alternatives and reinforces selective exposure.
Targeting advertising is not a process performed overnight, it takes time and effort to analyse the behaviour of consumers. This results in more expenses than the traditional advertising processes. As targeted advertising is seen more effective this is not always a disadvantage but there are cases where advertisers have not received the profit expected. Targeted advertising has a limited reach to consumers, advertisers are not always aware that consumers change their minds and purchases which will no longer mean ads are apparent to them. Another disadvantage is that while using Cookies to track activity advertisers are unable to depict whether 1 or more consumers are using the same computer. This is apparent in family homes where multiple people from a broad age range are using the same device.
Targeted advertising has raised controversies, most particularly towards the privacy rights and policies. With behavioral targeting focusing in on specific user actions such as site history, browsing history, and buying behavior, this has raised user concern that all activity is being tracked.
Privacy International is a UK based registered charity that defends and promotes the right to privacy across the world. This organization is fighting in order to make Governments legislate in a way that protects the rights of the general public. According to them, from any ethical standpoint such interception of web traffic must be conditional on the basis of explicit and informed consent. And action must be taken where organisations can be shown to have acted unlawfully.
A survey conducted in the United States by the Pew Internet & American Life Project between January 20 and February 19, 2012 revealed that most of Americans are not in favor of targeted advertising, seeing it as an invasion of privacy. Indeed, 68% of those surveyed said they are "not okay" with targeted advertising because they do not like having their online behavior tracked and analyzed.
Another issue with targeted advertising is the lack of 'new' advertisements of goods or services. Seeing as all ads are tailored to be based on user preferences, no different products will be introduced to the consumer. Hence, in this case the consumer will be at a loss as they are not exposed to anything new.
Advertisers concentrate their resources on the consumer, which can be very effective when done right (Goldfarb & Tucker, 2011). When advertising doesn't work, consumer can find this creepy and start wondering how the advertiser learnt the information about them (Taylor et al., 2011). Consumers can have concerns over ads targeted at them, which are basically too personal for comfort, feeling a need for control over their own data (Tucker, 2014).
In targeted advertising privacy is a complicated issue due to the type of protected user information and the number of parties involved. The three main parties involved in online advertising are the advertiser, the publisher and the network. People tend to want to keep their previously browsed websites private, although user's 'clickstreams' are being transferred to advertisers who work with ad networks. The user's preferences and interests are visible through their clickstream and their behavioural profile is generated (Toubiana et al., 2010).
Many find this form of advertising to be concerning and see these tactics as manipulative and a sense of discrimination (Toubiana et al., 2010). As a result of this, a number of methods have been introduced in order to avoid advertising (Johnson, 2013). Internet users employing ad blockers are rapidly growing in numbers. A study conducted by PageFair found that from 2013 to 2014, there was a 41% increase of people using ad blocking software globally (PageFair, 2015).
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