Behavioural targeting: How online ads got personal

Blockbuster film Minority Report painted a futuristic world in which our hero walks into a store and is delivered ads that address him by name and know exactly what he might need. To some, this might sound like a frightening prospect. To marketers, it is nirvana. And behavioural targeting takes us closer to this world than ever before.

In theory, it should be much easier to create an environment tailored to an individual's tastes in the online world than on the high street. After all, consumers can be 'followed' and their behaviour analysed in a way that is inconceivable offline. However, in practice, what has now been coined behavioural targeting is only just starting to take off in the UK. It strives to enhance a consumer's online experience by analysing their actions and only showing them related content or ads.

"The idea is that users are profiled according to their use of a web site and are served ads elsewhere on other sites based on this information," explains Joel Crawford, business development director at online ad technology firm Eyeblaster. He gives the example of a user who browses the Virgin web site to top up his mobile account. "When this user surfs the internet, using behavioural targeting, he may be served an ad about another Virgin product, but not one for mobiles as we know that he already has one," he says.

Paul Frampton, head of digital at Media Contacts, says this approach is nothing new, but what gives digital behavioural marketing an edge is the fact that it is based on "actual" rather than "predicted" behaviour. "Consumer magazines and niche TV channels have allowed us to reach consumers who display certain behaviour for years. That behaviour is assumed because of the content or qualitative research. But behavioural targeting on the web is targeting consumers based on a real knowledge of their previous behaviour," he adds.

Traditional methods of segmenting audiences are proving less effective. A person's choice of newspaper is thought to speak less about their background and political bias than it used to. "Defining consumers by traditional demographics is not as effective as grouping them by behaviour. Where they go and what they do online is a far better indicator of who they are," says Richard Foster, UK managing director at Revenue Science, which develops behavioural targeting technology.

Nic Peters, sales director at MediaBrokers, hails 2006 as "the year of behavioural targeting", during which she predicts that "an increasing amount of brands will understand the power of what online can deliver in terms of customer retention and targeting messages across any brand's broad audience".

Her enthusiasm is justified by the fact that brands such as BMW, BA, HSBC, Microsoft, Nokia and Volvo have run behavioural campaigns this year. EMarketer estimates marketers will spend $1.2 billion (£640 million) on the technique this year and that this will surpass $2bn (£1.05m) in two years.

Reduce wastage

Foster says: "Identifying people by their interests makes for more effective advertising. It enables marketers to reach the highest possible concentration of their target market when they are most receptive to the message. It gives them the ability to deliver 'timely' messaging, based on the sites a user has visited or the actions they've performed during their visits."

By qualifying users through observing their actions, marketers can reduce campaign wastage. They can avoid showing an existing customer an ad encouraging them to sign up to their service and, instead, focus on cross- or up-sell. This way, marketers can build better relationships by sending relevant messages and garner higher response rates. Behavioural targeting can also help them identify their most valuable customers. Foster adds that marketers also gain the chance to run ads in "unexpected contexts", to give them greater impact.

Audience understanding

Behavioural targeting can be useful in understanding which audiences respond best to which products and messages. This can be used to improve above-the-line campaigns.

Unsurprisingly, technology providers argue that behavioural targeting online can be applied to any product, service or brand. However, as Jack Smith, vice-president of product strategy at 24/7 Real Media, points out, the approach tends to work best when advertisers are looking to up-sell related products to existing customers. "It is also very effective where ads are served to someone who has already shown an interest in an advertiser's offering," he adds. Sectors that have experimented with this include car, finance, consumer electronics and travel.

Alison Guise, UK country manager at Mediaplex and Commission Junction, says behavioural targeting works particularly well with consumer products like mobiles and computers. In addition, she argues that "branding campaigns can benefit from behavioural targeting in the form of a storyboard campaign", such as the Nescafe saga. "The objective for running campaigns with a story is to ensure customers are exposed to different ads all the time. They can follow the brand story and have the option of a call-to-action on the last creative."

However, Foviance co-founder, Catriona Campbell, warns that behavioural targeting should be used with caution. "We are getting ahead of ourselves. Like web analytics years ago, everyone feels the need to own it before they are ready to use it. Very few companies have devoted enough time to getting to know their customers to benefit from it at the moment."

Technology has, indeed, developed rapidly over the past year. The market has seen the entrance of US heavyweights such as Revenue Science and BlueLithium. Technology providers like DoubleClick and Ad.com are starting to push their behavioural targeting wares more. "What has been slower to develop is understanding among agencies and advertisers. Many confuse behaviour with IP or contextual targeting," says Frampton. "We are still in a period of testing. Unless time is spent on set-up, expensive mistakes can be made. There's a lot of hype and not many advertisers actually doing behavioural targeting."

There are also various types. According to Crawford, the most basic level is "ad sequencing", which involves "creating different ads according to how a user interacted with the first". Say a record label is promoting three albums, it could let users download a free song. Based on the artist they select, they could be served a more targeted second ad. "The more advanced levels are 'advertiser side' and 'publisher side' behavioural ad targeting, which rely on user profiles built from either side," he adds, comparing this to how Tesco can send customers tailored offers based on their shopping habits.

Claria and Behaviour Link offer behaviour tools that rely on users downloading an application, which shows them ads based on their surfing patterns. Revenue Science helps publishers collect data on users so ads can be targeted to relevant segments. MediaBrokers' tool, by contrast, is advertiser-driven as messages are adapted for prospects and customers, depending which stage of the buying cycle they're at.

Eyeblaster also plans to launch an advertiser-driven product next month called Deja-Vu. Crawford explains: "Say our Virgin mobile user is served a banner on Virgin Money, offering two Virgin Money products: a credit card and life insurance. The ad 'remembers' which, if any, the user interacts with. If the user interacts with the credit card, the next time he sees a Virgin ad it will be about credit cards. If the user didn't interact with either product, he can be served something different."

As the popularity of blogs and social network sites such as MySpace continue to rise, some experts believe behavioural advertising will come into its own. "Sites like these are where a growing percentage of users are spending their time. But the content is so diverse from day to day that using the editorial as a guide for advertising is often ill-founded," says Foster.

While there's no mistake that the opportunities are there, some players are concerned the industry won't realise them. "If it is taken up in the right spirit, it will make advertising more advantageous to consumers and less of an irritant," says Crawford. "However, based on the direct mail that still fills my house, it will be done very well by a minority, satisfactorily by the majority, and terribly by a few."

Let's hope the industry learns from the predicament of junk-mail and proves him wrong.

BUTLINS HOLIDAYS BOOSTS WEB MARKETING PERFORMANCE

Butlins Holidays briefed digital agency Profero to explore new ways to boost web-marketing performance to improve brand identity, reach users in a cluttered travel market and minimise media wastage, while also attracting a new audience.

Profero decided to try behaviour-based targeting via MediaBrokers for the first time. It segmented the MediaBrokers Network of 200 top publishing sites, which it claims reaches 73 per cent of UK web users.

This was possible through technology that tracks audience behaviour through a system of 'action tags'. The agency then created specific creative executions for the various audience segments.

Profero could track users who had interacted with a specific part of the Butlins site and re-target them. For example, a user may have already visited, but failed to complete an online sign-up or carry out a transaction. Via re-targeted advertising, Profero could send new marketing messages to these users, driving them back to the site.

Nic Peters, sales director of administration at Media-Brokers, says: "The strategy enabled Profero to eliminate media wastage."

The campaign produced 77 per cent better results than past marketing efforts.

WILLIAM HILL ACHIEVES 125 PER CENT ROI WITH EMAIL PROMO

Gambling brand William Hill wanted to create an email push to convert customers who had registered on its site, but not yet placed a bet.

Through technology partner RedEye, William Hill started to segment last year's new registrations based on transactional and behavioural characteristics. It now sends these users targeted emails based on their profile.

Research last summer gauged the success of each ad, using RedEye's email measurement tools, and four segments were created, one being a control group. Different creative executions were developed for each segment, while the control group received no emails.

An initial email was sent shortly after registration and four days later a follow-up was sent to those who had not placed a bet. A week on, emails were sent to those who still hadn't gambled.

Results showed the email programme was nearly five times more likely to prompt the site's new users to place a bet than if no email was sent. Also, 1.2 per cent of all initial deposits were generated as a direct result of an email, giving ROI of 125 per cent.

"We can now communicate more effectively with current and potential customers," says Peter Nolan, director of interactive business.

NTT DoCoMo GAINS 61 PER CENT LIFT WITH FT.COM CAMPAIGN

Last year, telecoms brand NTT DoCoMo wanted to test the impact of targeting an audience behaviourally.

In particular, it wanted to understand how traditional brand metrics and the cost of a behaviourally targeted campaign compared to a 'run of site' (RoS) campaign, where ads appear randomly across the site.

It chose The Financial Times to carry out the test, with research by Dynamic Logic and Revenue Science as technology partner.

The aim was to boost brand awareness among the target audience of decision-makers working in IT and telecoms. It also wanted to raise the profile of the brand as a leading mobile developer.

The RoS and behaviour campaigns were carried out simultaneously on FT.com. To ensure the brand reached the right audience, Revenue Science analysed the articles being read by users containing words and themes with which NTT DoCoMo wanted to be associated and targeted ads accordingly.

Dynamic Logic found that targeting users based on behaviour produced higher uplifts in all the variables NTT DoCoMo wanted to measure. The behaviour campaign was 61 per cent more effective, lifting as high as 83 per cent in terms of awareness of the brand as a mobile pioneer.

This article was first published on revolutionmagazine.com