• by Phil Leggiere , December 1, 2006

Behavioral targeting is widely, and rightly, seen as having the potential to radically transform not only the tactics but the strategies of advertising. In actual practice, however, it remains for most publishers little more than a tool for squeezing a little extra revenue out of "sub-par" inventory, and for most advertisers a tactic for generating higher response rates. Worthy goals-- but hardly paradigm shifting. In the conversation below, Undertone Networks CEO Mike Cassidy outlines how some of his clients are extending the reach of behavioral targeting to play a more strategic role in building their customer relation management platform.

Behavioral Insider: How have the publishers, clients and agencies you work with changed in their perception of behavioral targeting compared to, say, a year ago?

Mike Cassidy: When we talk to clients and agencies about services they want, it's clear behavioral targeting is becoming increasingly accepted, not only by early adopters--but by Fortune 500 advertisers that have held off from new approaches. People want to execute behavioral targeting, and that's a decisive change from a year ago.

BI: What do you see as the biggest gaps, misconceptions or limitations in current thinking and practice regarding behavioral data in advertising targeting?

Cassidy: A widespread misconception by even very sophisticated clients and agencies is that behavioral targeting is strictly about surfing behavior. That's of course a part of what it is, and how it's been most popularly used so far, as a way to fill out lower demand inventory. The obvious application of behavioral targeting for beginners in the space is to locate a user who, say, has visited an auto ad three times in the last week. They can obviously impute high purchase intent to that user, so it makes sense to try to deliver even more auto ads to that user when he visits the sports section.

Many--I'd say at this stage, most--agencies and clients believe this is all behavioral targeting is. The biggest move now on the learning curve is to convince them that the implications of behavioral are far broader than that.

BI: What are some of the unique aspects of the ways Undertone is integrating behavioral targeting?

Cassidy: What we're discovering and what some clients are becoming increasingly enthusiastic about is that behavioral targeting can dramatically enhance the value of their customer relationship building practice.

What the newer approach does is to serve ads to network site visitors, not based on their surfing behavior around the network, but instead, or in addition to, based on their behavior when on the advertiser's own home page or any page on their Web site. By placing a pixel on the home page, advertisers can track how customers or would-be customers engage with the brand, segmenting customers with as much granularity as they wish in terms of what and how much, or how often, they buy; what types of content they browse; the intensity or casualness of their interest; and how short or how long their sales purchase cycle tends to be. They can then follow these customers anywhere on our network and serve them ads based on their customer profiles.

BI: Any specific examples of how this is being currently deployed?

Cassidy: Working with Radio Shack and its agency, CaratFusion, we used this approach to promote sales of Sirius Satellite Radio. We did this by serving ads to consumers who'd already visited the Radio Shack site as they moved through our Father's Day and gift-giving areas or family, entertainment, music and shopping channels. Radio Shack received a click-through rate 10 times higher than their previous campaigns, as well as substantial increases in traffic and sales on its specially built Sirius Radio landing page.

BI: What advantages beyond increased click-through are seen as most beneficial to advertisers at this stage?

Cassidy: The interesting thing that's exciting to clients is that they can evolve and refine both their advertising messaging (for greater relevancy and timeliness) and their customer profiling over time, based on a potentially far richer data set. A whole new universe of possibilities opens up for more efficient upselling, cross-selling and closing the sales loop in the sales cycle.

BI: What sorts of new developments in the BT space do you look forward to, going into 2007?

Cassidy: Over the next year I expect that surfing-based behavioral targeting will continue to be a focus of strong growth. But we will also see a strong uptick for the more holistic CRM approach I described.

As the technology progresses, there are questions we look forward to homing in on. One is how you can better quantify relevancy. By that I mean we know that taking an ad for travel and taking it out of its regular context ad placement can actually add relevancy by virtue of novelty, surprise and working around clutter. But the unanswered question is how many times you can reach a consumer this way before you see diminishing returns.

Related to that, there's the question of just what the optimal number of exposures to behaviorally served ads are. Very little is known about this yet. So a big goal for 2007 is to develop a far greater understanding of how frequency capping can work for behavioral ads.