Web analytics: The perils of niche targeting

Web publishers including Guardian Unlimited, News International and
Reuters have been quick to realise the benefits of tracking consumers
across the web in order to target them with highly relevant ad campaigns
based on their online habits.

In its simplest form, behavioural targeting allows digital media owners
to boost their online advertising revenue by using left-over inventory
across their sites. For example, a budget airline could follow a user
browsing the travel section of Times Online on to other areas of the
site, while serving them with ads for cheap flights. "Behavioural
targeting allows brand owners to run highly targeted campaigns that make
their budgets go further," says Tristan Leaver, head of business
development at Guardian Unlimited. "It has fundamentally changed the way
we do business with our advertisers."

Over the past 12 months, behavioural targeting has become a mainstay of
online advertising. Increasingly sophisticated tracking technology means
that advertisers can now pinpoint consumers with campaigns based not
only online usage, but also on geographic location, previous web
searches and propensity to purchase. The ability to target with such
accuracy is good news for brand owners keen to maximise the efficiency
of their online activity but it also brings with it a new set of
problems. "It's easier than ever for advertisers to get carried away
with behavioural targeting," explains Richard Foster, digital director
at Future Publishing. "It has become possible to filter a campaign so
heavily that you end up with an audience that is too small to target
cost-effectively."

Segmentation

A growing range of behavioural-targeting tools is on offer from
specialist firms such as BlueLithium, Revenue Science and Tacoda. These
tools allow web publishers to sort users into an increasing number of
segments, according to their online habits, personal interests and
demography. Advertisers can buy into these segments to run highly
targeted campaigns aimed at specific consumer groups. This principle
works perfectly for web publishers such as AOL, MSN or Yahoo!, which
have large audiences. Smaller sites however run the risk of slicing
their user-base too thinly. Advertisers launching behavioural-targeting
campaigns based on large numbers of discrete characteristics could end
up creating micro-niches, which are too small to generate return on
investment. "Behavioural targeting means that advertisers can now make
their campaigns as granular as they like," warns Donald Hamilton,
managing director of Wunderloop. "Theoretically, a car company could
target middle-aged men living in Billericay interested in buying Ford
Escorts."

Paul Goad, managing director of Tacoda, adds: "There is no point
optimising a campaign to the point where you lose reach."

Find a balance

There is a number of ways of tracking internet usage, but marketers must
decide which to use to help them strike a balance between reach and
relevancy for any given campaign. The most common form of behavioural
targeting utilises click-stream tracking to allow brands to target
consumers based on what they have looked at online. This includes every
web site and every page of every site visited, as well as how long the
user spent browsing a particular site and in what order the pages were
visited. A cookie placed on an internet user's web browser keeps track
of behavioural-targeting tags embedded on individual web pages. This
allows marketers to build up a detailed picture of a consumer's online
behaviour so that ads can be targeted to them. Meanwhile, IP address
tracking allows marketers to serve internet users with online ads based
on details such as their geographic location, the type of company they
work for and whether they use their laptop abroad. In addition, web
publishers that require users to register to enter their network can
also use those personal details to serve targeted advertising based on
sex, age and marital status.

"When you combine a number of variables, behavioural targeting can
become extremely powerful," says Neil Morgan, vice-president of
marketing, EMEA, at Omniture. "Advertisers and web publishers must weigh
up how they want to segment their audiences."

While behavioural targeting reduces wastage and boosts campaign response
rates, it does have downsides. Increased targeting can limit the ability
of marketers to use online advertising to grow their businesses.
Campaigns aimed solely at consumers deemed likely to purchase a brand's
products are unlikely to help grow that company's prospective audience.
For example, a hotel chain using behavioural targeting to advertise
solely to internet users interested in cheap rooms would be severely
limiting the size of its audience and the potential effectiveness of its
campaign. However, if the brand also targeted business travellers,
families and students, it could maximise the reach of its digital
activity.

"By testing and rolling out campaigns aimed at different audience
segments, advertisers can maintain the reach of their
behavioural-targeting activity," says Hamilton.

With behavioural-targeting specialists providing web publishers with the
tools to segment their audiences into hundreds of different categories,
the potential for over-targeting is clear. If too many behavioural
filters are applied to a campaign it will not only lose reach, but could
also end up becoming irrelevant. Consumers viewing automotive content,
insurance information and property web sites may either be in the market
for a new car, or looking to move house, meaning a campaign based on
these criteria has just a 50 per cent chance of being relevant. Jeremy
Mason, director of European client services at Revenue Science, claims
the success of a behavioural-targeting campaign relies on extensive
pre-testing and constant monitoring. 'It is crucial to be able to see
how audience size is affected by the targeting parameters being set for
a campaign,' he says.

In an effort to maintain the reach and brand-building potential of their
campaigns, some advertisers are using 'offsite behavioural targeting'.
By signing up to a behavioural-targeting network spanning thousands of
third-party portals, a publisher can allow advertisers to follow
consumers beyond the confines of its site as they journey across the
web. For example, a financial services advertiser could target consumers
browsing the money section of the Daily Mail web site with credit card
ads when they leave the publisher's network to check their bank balance,
visit an ecommerce shopping site or pay a bill online. "Offsite
behavioural targeting is incredibly effective at allowing advertisers to
reach high-value consumers at low cost," says Ed Stevenson, UK managing
director of 24/7 Real Media. "A brand could potentially target an FT.com
user when he leaves the site and logs on to Facebook for a fraction of
the cost of advertising on FT.com."

Expanding reach

Offsite behavioural targeting may also allow online media owners to
significantly expand their reach. Guardian Unlimited was one of the
first to bring offsite behavioural targeting to the UK, following a deal
with Revenue Science in May 2005. "It used to be a problem that key
audience segments such as travel sold out quickly," explains Leaver.
"Now, we can sell advertisers Guardian Unlimited readers who are
interested in travel elsewhere on the web." Leaver claims that Guardian
Unlimited has an 80 per cent repeat booking rate for all behaviourally
targeted ads across its network of sites.

Conde Nast, Sky and Channel 4 have also invested in behavioural
targeting. Emap is in the process of implementing an extensive
behavioural-targeting strategy across its network. According to Bruce
Daisley, digital sales director at Emap Advertising, behavioural
targeting means that if the Heat homepage is sold out, the publisher
will be able to help brands can target the same users on other sites
within its portfolio. "Consumers are undoubtedly more responsive to ads
that improve the online experience," he says. "Behavioural-targeting
campaigns that maintain reach and relevancy represent the future of
online advertising."

Future Publishing is also rolling out behavioural-targeting technology
across its network of web sites, which includes T3, SFX and Games
Master. Foster, who joined Future Publishing earlier this year, having
previously been UK managing director of Revenue Science, claims
advertisers shy away from low-value inventory that it is not
contextually relevant. "Our aim is to take high-value advertisers from
premium-inventory areas and distribute them across other sections of our
sites," he says.

Double the chances

Even Yahoo! recognises the importance of allowing advertisers to target
large numbers of consumers with behavioural-targeting campaigns. In
September, the internet giant acquired BlueLithium for £149m in an
effort to allow brand owners to serve highly relevant ads to web users
once they left its network. Blake Chandlee, commercial director of
Yahoo!, is working to raise the proportion of media revenue generated by
behavioural targeting from the current 7.5 per cent mark to 15 per cent
by the end of the year. Yahoo! is in the process of expanding its
behavioural-targeting offering to include 120 different programmes for
clients spanning automotive, FMCG and travel sectors. The move is a
response to growing demand from advertisers and agencies keen to improve
the efficiency of their online activity. "Marketers are becoming
frustrated by the lack of behavioural-targeting opportunities available
in the marketplace," says Mason. "They want to experiment more
sophisticated techniques that will drive their businesses forward."

One of the newest and most innovative behavioural-targeting techniques
intended to balance reach and relevancy is known as 'search
retargeting'. This allows advertisers to retarget potential customers
that have already shown an interest in their products through search
queries on Google, MSN or Yahoo!. The process begins when a user types a
keyword into a search engine and clicks on a sponsored link. The user
can then be retargeted with display ads for specific products on the web
site they initially clicked through to and then every other site they
subsequently visit. The technique also allows for ads to be modified so
they relate to specific stages in the online buying process. For
example, a month after a consumer originally conducted a web search,
when it may appear they are losing interest in a purchase, they could be
targeted with an ad offering them a 10 per cent discount. "Search
retargeting is the only method of behavioural targeting that sees
internet users presented with ads relating to products they are actively
looking to purchase," says Ed Stevenson, UK managing director of 24/7
Real Media. "It is about as clever as online advertising gets."

A handful of networks including 24/7 Real Media, BlueLithium and Revenue
Science offer search retargeting, but this is expected to increase as
advertisers wake up to the potential of the technique during 2008.
Interchange FX, the foreign currency exchange, recently signed up as one
of the first UK brands to trial 24/7 Real Media's search-retargeting
service as part of an online advertising strategy. The company claims
search retargeting has already helped boost click-through rates by eight
times. "We are now able to serve ads to consumers based on what we know
they are interested in buying," says John Harrison, chief executive of
Interchange FX.

The increasing sophistication of behavioural targeting means there are
more ways than ever for web publishers to slice and dice their
audiences. Meanwhile, brand-owners are growing more enthusiastic to
improve the efficiency of their online campaigns by targeting consumers
with highly relevant ads based on their online habits, personal
interests and demography. "For advertisers, relevancy coupled with the
right creative at the optimum frequency will increase overall campaign
effectiveness," says Tim Brown, European managing director of
BlueLithium. "For publishers, ensuring that their user has the best
possible experience on their site will lead to increased visits and
higher levels of satisfaction." It's win-win all the way.

COCA-COLA PUSHES REWARDS

Earlier this year, Coca-Cola launched a heavyweight behavioural
targeting campaign to encourage internet users to take part in its My
Coke Rewards loyalty scheme.

The drinks giant partnered with Tacoda to devise a digital marketing
drive to raise awareness of the initiative, which allows consumers to
redeem prizes online in exchange for drinking products such as
Coca-Cola, Fanta and Sprite.

The goal of the campaign was to identify internet users that would be
interested in My Coke Rewards according to their online usage habits.
These consumers would then be targeted with ads intended to drive them
to the My Coke Rewards website.

Coca-Cola developed a direct-response online advertising campaign with
behavioural targeting technology aimed at allowing it to achieve
mass-market reach at a low cost. Tacoda identified several dozen
consumer key segments, including users with a passion for entertainment,
sports and gaming. It then optimised its ad serving to focus more
impressions against those segments that drove the highest-qualified
participants to the My Coke Rewards programme.

Coke then created a series of ads targeting each of the specific
consumer segments, while still being general enough to deliver its
broad-based campaign message to a wider audience. 'This approach was a
cost-effective way to be relevant to our behavioural target segments and
still have creative that met the needs of a mass reach campaign,' says
Karma Crawford, senior interactive brand manager at Coca-Cola.

Coca-Cola delivered several creative concepts with multiple combinations
of graphics, copy and offers that were designed to appeal to specific
consumer segments as well as internet users as a whole. According to
Crawford, the combination of effective behavioural targeting and bespoke
creative execution helped attract millions of internet users to the My
Coke Rewards programme.