• by Phil Leggiere , March 10, 2006

Is behavioral targeting a "disruptive technology," one that dramatically change the online advertising status quo? Or is it an innovation whose basic impact will be to make the powers- that-be simply more powerful? While the answers to these questions are as yet unclear, many clearly see BT as doing the latter, allowing a handful of top-tier content sites to charge ever higher CPM premiums, widening the gap between the haves and the have-nots. As the conversation below with Dakota Sullivan, CMO of ad network Blue Lithium, makes clear, however, BT's implications may be far more radical than that.

Behavioral Insider: What types of companies or campaigns benefit most from behavioral targeting, in your experience? Which industries seem to have been the most successful at implementing it so far?

Sullivan: There are two kinds of behavioral targeting, and each works best for certain types of companies. In our experience audience targeting works great for businesses in categories where online inventory is in short supply or pricing is inflated, such as automotive or financial. It lets online stock span brokerages, for example, and identify traders on non-financial sites that are less saturated and less expensive. It also lets them break out of the site list/inventory limitations they're typically hampered by, making it easier to scale up targeted campaigns. Retargeting, on the other hand, works particularly well for businesses that sell or transact online. Wireless providers, for example, can use retargeting to identify their customers who've purchased handsets, locate those customers as they travel across a network and upsell them subscription services. They can even show those customers sequential creative messaging until they find the right offer that brings them back to their Web site for the upsell transaction.

BI: Do you see BT as changing the power balance, especially pricing power, between the big portals and top content sites, and advertisers?

Sullivan: What brand marketers are finding is that behavioral is a way to improve their efficiency. The big sites jumped ahead in advertising by aggregating these huge audiences, and that's the way advertisers initially saw the Web, in terms of how many eyeballs they could reach with a single site buy. The problem, of course, is that it gives great pricing power to a few players, and also lessens the efficiency of the buy because all your competitors are jostling for the same high-price positions, and that spells clutter.

With behavioral targeting, you can get at highly desirable customers in less expensive and less competitive environments. In addition, there's increasing evidence that delivering ads in unexpected contexts gives them greater impact.

BI: Behavioral targeting has obviously been discussed for many years, but only recently has it seemed to gain major traction with advertisers. Do you think the timing is a question of the technology catching up with the needs of online advertisers, or the knowledge and online savvy of advertisers starting to catch up with the technology?

Sullivan: I think the surging adoption of behavioral targeting definitely has to do with advertisers moving toward the technology, not vice versa. It reflects the fact that, overall, advertisers are much more comfortable with online advertising and online ad technologies than they were just a few years ago. They're better able to cut through the confusion and misinformation that originally surrounded behavioral targeting, to see the real bottom-line benefits. It was only natural that marketers wanted to target online the same way they'd always targeted offline: by evaluating the context and demographics of the media environment first and the expressed interests of the audience second. A technology that promises to let you buy the audience,irrespective of where they travel on the Web, took some trust building, some peer review and hard data for the majority of marketers to adopt it. And that process takes time.

BI: So far BT seems like it's more of a direct response phenomenon than a branding one. Do you see that as changing?

Sullivan: As with many other technologies, behavioral targeting was first adopted by direct marketers, who are by nature test-and-learn marketers. Like with search a few years ago, the first companies to really jump in with both feet were those who could see the most immediately tangible benefits--and with direct marketers, it's lower cost per customer acquisition.

BI: So do you think BT will be a catalyst for getting big advertisers to expand their range to include what's being called "The Long Tail"?

Sullivan: The limitation of behavioral targeting for bigger brand advertisers has been that although you can find a customer more efficiently, you also have less predictability about what kind of content is going to surround your brand. The conundrum has been that marketers know they want to be in those niche passion places their competitors haven't discovered yet, but they don't want to be on sites where their product is trashed by a blogger.

Everybody knows the parable about the nine blind men touching the elephant. Each describes a different elephant. Well, that's what behavioral targeting has been to date. For some it's tracking customers beyond one Web site across the Web; for others, it's reinforcing advertising to reach existing customers more often; for still others, it's more precise segmentation, or heightening the brand message by placing it in unexpected places. Till now it's been supply-driven. The idea's been, "here's an application we've got, why don't you as an advertiser figure out how to do your marketing within its constraints." The place where it's now time for the industry to go is to be more advertiser-demand-driven. "Here are our marketing challenges; how do you, as a technology supplier, customize your solution to solve them?"