• by kyle , Daisy Whitney , March 2, 2009

"As marketers increasingly look toward the Internet to reach their audience, they also seek tactics - such as behavioral targeting - that can potentially make the most of each dollar spent in a slowing economy," explains David Hallerman, senior analyst with eMarketer and author of a 2008 report on behavioral targeting.

Spending on behavioral targeting reached $775 million last year and should rise to $1.1 billion this year and then nearly quadruple to $4.4 billion by 2012. That would represent about one-quarter of all u.s. display ads and nearly 9 percent of all Internet advertising in 2012.

Hallerman believes the spread of online video advertising will play a critical role in growing behavioral targeting. "By 2012, online video advertising - the most costly form of advertising on the Web - will be firmly established," he says. "Layering behavioral targeting techniques on top of video will help increase the efficiency of these ad buys."

There are other reasons the behavioral targeting business will thrive this year, Hallerman adds. Because behavioral targeting is based on serving the right ad to the right consumer at the right moment, it is considered one of the most effective online ad mediums. It works for both branding and direct response. Marketers are also moving more of their budgets to the Internet and behavioral targeting will benefit. "One catalyst for brand shifts online is the promise of greater relevancy, which behavioral targeting fulfills better than other current display-ad-oriented techniques," Hallerman says.

Behavioral targeting campaigns also benefit Web publishers, too, letting them wring revenue from unsold inventory. But behavioral targeting is more sophisticated than just mixing and matching data to likes and dislikes. To work well, behavioral targeting should rely on predictive analysis to determine an Internet user's interests, Hallerman explains.

The medium's not foolproof though. One of the risks with behavioral targeting is the ads are often unrelated to the content. That creates the unappealing possibility that an ad could be paired with Web content that's not a good brand fit. Some ad experts have also said behavioral targeting contributes to the commoditization of Internet advertising.

Part of that problem stems from the use of ad networks. Many advertisers will buy online ads using ad networks, including those of the behavioral targeting variety. Such a buy brings with it the benefits of reach for an advertiser, but can also increase the risk that a brand may be placed next to the wrong ad, eMarketer warns. Ad networks themselves make some ad experts skittish because they group inventory together. After all, Wenda Harris Millard, the president of media for Martha Stewart Living OmniMedia, famously said last year in reference to ad networks, "We must not trade our advertising inventory for pork bellies."

Let the buyer beware, then.