Many businesses hope to use targeted advertising to boost sales. However, new data suggests that the benefits of targeted advertising may not justify its added cost.
What are targeted ads?
Generally, targeted ads appeal to the unique attributes of audiences and individuals. They depend on the deployment tracking of cookies on end-user devices. Advertising networks such as Google’s AdWords track those cookies and serve behaviorally triggered ads at relevant times and locations.
In theory, the increased relevance of targeted advertisements makes them more beneficial to publishers by increasing conversion rates. Consequently, this type of ad typically costs more than traditional contextual ads.
Advertising platforms can use one or more data sources to predict the types of products and messaging to which user will respond.
A study called, “Workshop on the Economics of Information Security” showed that targeted ads aren’t as effective as thought.
Benefits of Targeted Ads
Although more than 90% of online advertisements use behavioral data to target users, some new data suggests that some publishers are contemplating whether the benefits of targeting users with ads outweigh privacy concerns.
To help advertisers make good decisions, researchers designed a study to determine the monetary benefits of targeted versus contextual ads. The endeavor looks beyond the effectiveness of targeted advertising for advertisers to look at how this form of advertising affects publishers.
Researchers obtained one week’s worth of data from a publisher that operates websites in several vertical markets. Part of this data included an indication of the availability of cookie ids so that they could analyze the price differences between targeted and non-targeted advertisements.
The results of the study showed that, on average, targeted ads generate 4 percent more revenue over their untargeted counterparts. This amounted to $0.00008 per add. That’s 8 one-hundred-thousandths of a cent per ad.
A Win-Win for Adtech
So, by using what the study refers to as “invasive surveillance,” publishers gain about 4% over contextual, non-invasive ads. On the other hand, adtech giants such as Google and Facebook seem to profit much more than that. For example, the study shows that advertisers are willing to pay 60% more for behaviorally targeted ads.
In addition to receiving more benefit than ad publishers from the selling price of ads, Google and Facebook reap more rewards through the sale of user data. Furthermore, the adtech industry gains even more by using these additional profits to lobby for tech-friendly and anti-privacy legislation and regulations.
You can download the entire study from the Workshop on the Economics of Information Security.
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