Advertising.com: Behavioral Targeting Increases Conversions

Serving ads to consumers who already have demonstrated an interest in the product or services offered by the marketer is a more efficient use of online ad dollars than serving ads to the public at large, according to a study released Tuesday by America Online's Advertising.com.

For the study, Advertising.com evaluated the performance of three online ad campaigns--in the financial services, automotive, and education spaces--conducted between July and September. For all three campaigns, Advertising.com served identical banner ads to Web users at large, as well as to users who had visited a site relevant to the marketers' business in the last 30 days. For example, for the car campaign, Advertising.com targeted people who had visited a car research site within 30 days, and then compared how that group responded to ads with how consumers at large responded.

The company found that conversion rates were higher for the group that had been targeted based on Web surfing than for those served ads on a more random basis. The car campaign saw a 323 percent increase in conversion rate, defined as completing a registration form. The finance campaign saw a 90 percent increase in conversions, defined as opening an online bank account; and the education campaign saw a 105 percent increase in conversions, measured as those who filled out a registration form.

At the same time, in a counter-intuitive finding, the study also revealed that click-through rates were lower for the targeted group than the more random ad viewers. Click-throughs for the car campaign fell by 64 percent for the targeted consumers; for the education campaign, the rate fell by 22 percent; and for the finance campaign, the drop-off was 56 percent.

The lower click-through rate came as a surprise to researchers, who had expected that users who were tagged as potential customers would want to click and convert at a higher rate than the more random users.

One theory that might explain the lower click-throughs is that some Web users are simply more curious about ads than others, said Eric Eller, director of behavioral marketing at Advertising.com. Eller suggested that targeting might also filter out the more generally inquisitive types who click on ads without any intention of purchasing. "When you target a group," proposed Eller, "you're losing the clicks coming from the generally curious."