A new study from MIT shows that using simple rules of thumb when personalizing ads is not likely to yield higher results, and that personalized ads are more likely to be ignored as compared to generic ads.  This and other consumer outcry against highly targeted ads highlights the need for more sophisticated and subtle targeting and creative optimization.  When done right, creative optimization can be a main performance driver of the campaign, and MediaMind data shows that creative optimization improves CTR by 70% and Conversion Rate by 40%. 

According to MIT, highly targeted ads that are based on user historic data do not generally work better than generic ads.   The researches gave the example of shopping cart abandonment, a retargeting favorite for advertisers.  According to the study, retargeting a consumer with a pair of sneakers after he failed to complete an online purchase may actually not be as effective, since abandonment may indicate that he is not interested in the pair.  Therefore, chasing him with ads exhibiting those sneakers over and over again is less efficient than showing a random ad of another product.

The researchers also tested whether users were more likely to purchase travel products after seeing both a targeted ad and a generic ad.  The results showed that targeted ads were more effective only in cases where the user had exhibited well-developed product preferences. 

The rule of thumb, according to the researchers, seems to be that personalized ads are more effective when shoppers are close to making an actual purchase.  When online shoppers were looking at broad product categories, targeted ads were less effective. However, when consumers visited a review site to seek details about a specific product, personalized ads became more effective. 

How can advertisers know whether shoppers are closer to the purchase across all of the placements and data points in the campaign?   It is hard enough for a human being to do that on a large scale.  The good news is that we don’t have to do all the hard work.  Advertisers can use optimization algorithms to decipher whether they should run a personalized ad or a generic ad. 

The way to do it is by using the ‘better ads play more’ algorithm.  This algorithm continually tests for users’ response to the ads that are served.  If users are close to the purchase decision, and one specific ad is more effective to that set of users, then that ad will run more than the other ads.  If, on the other hand, users are further away from purchase and are equally responsive to all ads, it will play all ads equally.

The important evidence shows that using brute force for retargeting can actually yield sub-optimal results for a campaign.  Therefore, when using retargeting, it is important to choose a flexible optimization algorithm that can identify whether personalized or generic ads are most effective.

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