The Next Frontier: Behavioral
Targeting Tips the Scale
Behavioral targeting (BT) has been rehearsing its pitch in the wings of the interactive marketing stage for years, but in 2007 the former dark art is headed for the spotlight.
Nearly a quarter of advertisers expected to deploy BT by the end of 2006 and into 2007, while only 14 percent had used it previously, according to a JupiterResearch survey. In April, eMarketer predicted a substantial uptick in spending on BT between 2007 and 2008, from $1.5 billion to $2.1 billion, largely because advertisers and publishers must make the most of limited and costly inventory.
Susquehanna Financial Group raised its expectations even higher, maintaining that BT would serve as a "catalyst" for online ad sales growth and set new benchmarks for Web page monetization. "We thought it could reach about 12 percent of total online spending over the next five years," says Marianne Wolk, Susquehanna analyst.
More publishers are signing on to deliver ads against their own visitors' usage patterns. But the real tipping point comes as more of them bring their inventory into ad networks. Collectively, publishers will start creating segments that are granular enough to deserve premium CPMs, yet deliver enough volume for serious media buys.
"What scale means is very significant," says Dave Morgan, founder and chairman of Tacoda, whose network claims 110 million unique visitors across 4,000 sites. Buyers want BT, but not in slivers from multiple sites. For publishers, Morgan says, "Participating in a highly scaled network is the only way to get the kind of monetization yields that Google or Yahoo deliver."
He sees more publishers now willing to participate in networks; Tacoda stopped selling its BT technology as a standalone product for sites more than a year ago. While some media buyers dream of the day when these emerging networks will standardize a common technology and behavioral segmentation, Morgan expects that "one or two will achieve mass scale on their own."
Direct marketers are also getting smarter about using BT networks to retarget the costly traffic they harvest from search. In the Web-hosting sector, keywords can run $20 a click, and the cost to acquire a single customer hovers at $120. The firm eBridge Marketing Solutions tagged and tracked the search traffic its hosting clients received into Revenue Science's BT network.
"We've been able to convert those visitors into clients, and bring the acquisition [costs] down to somewhere in the neighborhood of $70 to $80," says eBridge CEO Hartland Ross. Marketers that can deliver scale to a client's landing pages will be able to retarget window-shoppers more effectively as the BT network expands.
That expanded reach and increased BT usage may drive everyone in the ad ecosystem upscale, Wolk argues. As media buyers clamor for more scale and inventory, publishers with highly qualified audiences will demand a greater premium - higher CPMs and more attractive revenue-sharing deals with the BT networks.
Sites with the deepest user data win big in a media economy based on consumer profiles, as illustrated by Google's $900 million guaranteed revenue-sharing deal with MySpace. Ultimately, however, behavioral networks could move attention away from search, where much of the online ad growth has taken place in recent years, because they may offer display advertising even better targeting and page monetization.
"I think with BT we might be able to get more spending by other industries and others that are still in the trial stage," Wolk says.