Behaviorally Targeted Ads Yield Twice The Revenue and Twice the Converts

According to The Network Advertising Initiative (NAI), behaviorally-targeted advertising in 2009 secured an average of 2.68 times as much revenue per ad as non-targeted "run of network" advertising. The study also found that behaviorally-targeted advertising is more than twice as effective at converting users who click on the ads into buyers (6.8% conversion vs. 2.8% for run-of-network ads), and that behavioral advertising accounted for approximately 18% of advertising revenue.

Economist Howard Beales, who conducted the study, notes that "... behaviorally targeted advertising is a critical component of ad network, publisher, and advertiser success... significantly enhancing the advertising revenue engine driving the growth of the Internet."

Charles Curran, Executive Director of the NAI, says "... This study demonstrates the increasing significance of behavioral advertising to the economic model supporting free online content and services for consumers... we will continue to work closely with policymakers... to give consumers better information, tools and choices, while making online advertising even more relevant to their needs."

Key findings of the study include the following: ·

  • The average relative cost of behaviorally-targeted ads in 2009 was 2.68 greater than that of standard run-of-network advertising
  • The weighted average cost per thousand ad impressions (CPM) for behaviorally targeted ads was $4.12, as opposed to $1.98 for run-of-network advertising
  • Behaviorally-targeted ads accounted for 17.9% of respondents' advertising revenue, with revenue increasing from 16.2% in Q1 to 19.4% in Q4 2009
  • 54.6% of the respondents' advertising revenue went towards the purchase of inventory and was therefore shared with publishers and content producers to support their businesses
  • Data from a smaller subset of the survey respondents suggested that users who clicked on a behaviorally-targeted ad were more than twice as likely to complete a transaction or sale with that site than those who clicked a standard run-of-service ad (6.8% vs. 2.8%)
  • Total online ad revenue for the twelve companies who participated in the study was $3.323 billion in 2009.

The study was conducted from January to March 2010 with the participation of twelve online advertising networks and marketing analytics companies that belong to the NAI. Study participants provided proprietary data on the revenue, composition and effectiveness of different types of online advertising on their networks.

The report includes a comprehensive chart that presents the weighted average CPM among participants for each of the three ad types, as well as conversion rates and revenues. The results show that BT provides significantly higher rates on an industry wide basis. For the full year 2009, BT CPMs were about double RON CPMs, while Retargeting rates were about 1.5 times as large as RON CPMs.

Key Survey Metrics


Q1 2009

Q2 2009

Q3 2009

Q4 2009


Average CPM (Weighted By Behavioral Targeting Revenue)

Run of Network


















BT Avg. Relative Price Over RON Ads (X Greater)






Retargeting Avg. Relative Price Over RON Ads (X Greater)






Average Conversion Rate

Run of Network













Total Ad Revenue ($ Millions)






Percentage Attributable to BT (Aggregated Across Firms)






Avg. % of Display Ad Revenue Used for Inventory Costs






Avg. % of Display Ad Revenue Used for Data Costs






Source: NAI, The Value of Behavioral Targeting, March 2010

The results lead to 3 major conclusions, says the report:

  • Advertising rates are significantly higher for behaviorally targeted (BT) ads. The average CPM for BT advertising is just over twice the average CPM for run of network (RON) advertising. On average across participating networks, the price of BT advertising in 2009 was 2.68 times the price of run of network advertising
  • Advertising using BT is more successful than standard run of network advertising, creating greater utility for consumers and clear appeal for advertisers. Conversion rates for BT advertising are more than twice the rate for RON advertising
  • A majority of network advertising revenue is spent acquiring advertising inventory from Web content and services providers, making BT an important source of revenue for publishers as well as ad networks

For more about the study, a PDF file may be accessed here.

4 comments about "Behaviorally Targeted Ads Yield Twice The Revenue and Twice the Converts".
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  1. Walter Sabo from HitViews, April 7, 2010 at 10:01 a.m.

    Targetted advertising has been the very successful basis of ad sales in radio since 1952. Nothing targets as well as radio and no content creators know their audience as well as radio programmers. Same can be set for segmented magazines. This is not new. Good article.

  2. Mike Einstein from the Brothers Einstein, April 7, 2010 at 12:22 p.m.

    Twice the return at twice the cost? Where's the advantage?

  3. Michael Mcmahon from ROI Factory / Quick Ops, April 7, 2010 at 1:18 p.m.

    I'm with Mike Einstein. This just suggests they've developed an efficient pricing model. If you account for all the additional thought and work that goes into creating and managing a BT campaign vs. a dumb RON campaign, this would show that it's cheaper, I mean "more efficient", to just buy RON. Am I missing something?

  4. April Reinhard from dallas morning news, April 8, 2010 at 1:43 p.m.

    I have the same comment as Mike Einstein. This article says that it costs 2.68 times as much to run an average BT ad (vs non-BT ads). This article also says that the increase in revenue gain for the advertiser is 2.68 times as much (as non-BT ads).

    is this a typo??

    what it amounts to is an average revenue gain to the advertiser of $0. that can't be right...

    please let me know if this is correct or not.

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