Whatever you call it - behavioral targeting, audience targeting, behavioral advertising- it has been the subject of much back and forth regarding best practices, how to implement it effectively, etc. But when you get down to it, the important thing, and the reason we debate all the other stuff, is that targeted advertising works.
To examine this important issue, the NAI recently commissioned Prof. Howard Beales, former Director of the Bureau of Consumer Protection at the Federal Trade Commission (FTC) to conduct a study on the value of behavioral advertising using actual data from 12 participating ad networks.
The key findings were:
(1) Advertising rates are significantly higher for behaviorally targeted ads. The average CPM for behaviorally targeted advertising is just over twice the average CPM for run of network advertising. On average across participating networks, the price of behaviorally targeted advertising in 2009 was 2.68 times the price of run of network advertising.
According to the second finding, it is commanding the higher price because:
(2) Advertising using behavioral targeting is more successful than standard run of network advertising, creating greater utility for consumers from more relevant advertisements and clear appeal for advertisers from increased ad conversion.
And the rates advertisers pay translate to higher rates for publishers:
(3) Finally, a majority of network advertising revenue is spent on inventory, making behavioral targeting an important source of revenue for publishers as well as third party ad networks.
This study validates the value of online behavioral advertising to advertisers, publishers and consumers. Advertisers benefit from the increased conversion rates for OBA campaigns relative to run of network. Publishers benefit from higher rates paid for the inventory used in OBA. The higher conversion rates for OBA demonstrate that consumers respond more to relevant advertising and OBA has value for them. The argument has frequently been made that consumers benefit from a wide variety of free products and services available on the Internet, which are supported by Internet advertising, including OBA. The response here identifies the actual economic impact of OBA and the extent to which it supports the free content model.