• by Scott Eagle , April 24, 2003

It's been said over and over: 'the Internet will offer marketers the ability to speak to the masses on a one to one basis.' And with an eye toward that goal, the Online Advertising industry has developed ad products more complex than anything that has been available to date - sophisticated ad servers, broadband-biased rich media formats, day-part targeting, and an exhaustive array of advertising formats. All of these are impressive, but potentially miss the key ingredient necessary to make one to one marketing truly effective - relevance.

Relevance turns advertising into information.
Relevance is one of the most consistent drivers of successful advertising campaigns - especially in today's cluttered Internet environment. If a consumer is considering a purchase in a certain category, or knows she will be, information about that category becomes relevant and valuable. In the offline world, brand marketers understand this. They know they only have a few seconds to get into a consumer's mind and make their point. They continually strive to find the consumer insight that allows them to create a frame of reference that makes an ad relevant and compelling.

The effectiveness of relevance can easily be seen in a simple example. Consider the man selling umbrellas from his newsstand outside the local train station.

If he is yelling "UMBRELLAS FOR SALE" but there isn't a cloud in the sky then he is wasting time/ad impressions and worse, is potentially alienating consumers. (Irrelevant and intrusive ad.) If he is yelling "UMBRELLAS FOR SALE" to consumers who are not carrying umbrellas, and it is raining, then he is relevant and many consumers will buy an umbrella. Moreover, these consumers appreciate the salesman for providing value when they needed it. (Relevant ad.)

In the world of Online Advertising, the message is clear: RELEVANCE is the foundation that will be needed to scale online media to new heights. And with the Internet, it is possible to conduct large-scale campaigns targeted by relevance.

The Traditional Way: Demographic Targeting
To understand the future of consumer targeting, it is helpful to understand where it came from.

In the late 1800s, J. Walter Thompson originally brought demographics to advertising as a way to make commercial messages more efficient and cost-effective for advertisers. He developed a way of profiling groups of people and making generalizations about them. This helped reduce impressions to consumers who didn't care about the product and allowed advertisers to get their message in front of a higher percentage of potentially interested consumers.

However, in the 21st century with the proliferation of consumer products and choices, it has become more difficult and less efficient to categorize people based on demographics alone. Consider the millions of dollars that an automotive company spends to promote a new luxury sedan. The traditional offline (and online) approach would be to demographically target high-end professionals.

But what are the likely results of a campaign composed of impressions that are delivered with high frequency to the 92+% of the population that are not in the market for a car? While there are branding benefits to this campaign, an overwhelmingly large percentage of the effort is wasted.

The Differentiation & Power of Online Advertising - Relevance vs. Demographic Targeting
The power of Online Advertising is that you don't have to shotgun your message to a broad demographic, as in traditional media. The promise of one-to-one Internet marketing is that the inefficiencies of offline media could be remedied - that the right message could be delivered to the best target consumer, at the right time. Mere demographic targeting sells Internet marketing short. Translating an audience like "car buyers" into a target demographic, then attempting to reach that demographic online doesn't take full advantage of the insights that the Internet offers versus offline media. Ideally, wouldn't it be far more beneficial for both consumers and advertisers to communicate to car buyers when those consumers actually demonstrate, via their online behavior, that they are in the market for a car?

Advertisers want the ability to communicate their message to their target audience - preferably when these consumers are engaged in a purchase decision, but at the very least to inform them about their brand offering for future reference. Traditional agency online media planning to meet this objective is usually executed on a tried-and-true mass-market media approach through identifying the core target audience by demographic/psychographic profiles; developing broad creative messaging, casting a wide net; and attempting to identify reach and effective frequency goals (e.g., accepting that a good percentage of the target audience will not see the ad enough times, and that a large percentage will see an overkill of ad impressions).

But online click, conversion and branding metrics continue to decline in spite of these "proven" offline approaches.

And it's no wonder. Let's look again at the auto example to illustrate why. An auto manufacturer has a limited budget to accomplish its sales and branding goals. With perhaps only 5% to 8% of the population involved in a current auto purchase cycle at any given time, broad reach campaigns potentially leave over 900 out of every 1,000 impressions to be either wasted or chalked up to "building awareness." Therefore, some portion of these 900+ consumers have been beaten over the head with numerous ads; bandwidth-hogging, intrusive ads; page takeovers, surround sessions, etc. when they had no interest.

Vertical content sites, targeted sections of portals and Paid Search providers represent part of the solution - but often there isn't nearly enough highly targeted inventory (e.g., SUV buyers) to meet the needs of media buyers without having to move to demographic targeting.

The argument by many advertisers is that awareness building is necessary to stay within the consumer's competitive set so that when the purchase cycle begins, their brand will be considered. So while many would agree that demographic targeting is often inefficient, given the sporadic nature of consumption they feel that it is still a smart tactic. But they also agree that the Holy Grail would be to know the moment a consumer's purchase cycle began so that the majority of ad spending could be targeted against this behavior.

The Effective Way: Relevance-Based Targeting
An auto manufacturer using relevance-based targeting can reach the best audience - not only consumers who are demographically targeted such as high-end professionals, but also those who have demonstrated some actual interest in a particular class of car and who are actively involved in an auto purchase cycle. This type of relevance targeting can only be achieved by a new kind of ad network that has the power to anonymously track the surfing patterns of consumers and the ability to serve the ad. With this capability, ads that are relevant within the current context of a consumer's surfing behavior can be synched up with historical patterns, allowing the targeting and delivery of an ad that is likely to be of interest to the majority of the recipients.

If an advertising message - regardless of its format - is relevant, it will elicit a positive response from the target audience. In effect, one could use behavioral targeting to create a nearly zero-waste environment where little money is spent on poor prospects. This would allow marketing budgets to be efficiently focused on highly interested consumers who would receive a concentrated amount of relevant advertising messages.